by Dennis Smith
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Cash was higher yesterday and receipts were not huge leading one to easily conclude that today’s cash will also be higher. We were admittedly surprised by the strong cash as the weather broke and definitely surprised at the round of fresh contract highs yesterday which started on the opening bell. The kill was pegged at 463,000 with today’s effort estimated to come in at 466,000. The weekly kill is projected to be just under 2.5 million pigs. No matter…, futures are still going higher, climbing the wall of production. Excellent volume occurred yesterday in futures, reported at over 72,000 for the highest volume trade since Nov 10th. Despite the start of the Goldman Roll and index fund rebalance, open interest surged upward by 2,400 cars. We own Feb puts but otherwise we’re not involved.
Cash trade occurred yesterday as reported by the USDA in TX and KS at $1.20, down from last week’s trade of $1.21 to mostly $1.22. WE heard additional trade occurred in NE and IA but was not reported in time. The show list is even with last week yet larger than last year. The choice beef was up .69 with the choice/select spread leaking severely, quoted last night at $6.83. As futures collapsed yesterday with the Feb contract taking out their Dec lows, volume was exceptionally large at nearly 106,000. That’s the highest daily volume since Nov 10th, just after the market topped in the fall. Open interest surged higher despite the Goldman Roll and despite the fact that index funds are reducing their net long position. Total open interest was up 3,000 which is new shorts coming in. Taking out the December seasonal low in January is rare but bearish when it does occur. Look for downside follow through across the board including feeders.
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The risk of loss in trading futures and options on futures can be substantial. The author does not guarantee the accuracy of the above information, although it is believed that the sources are reliable and the information accurate. The author assumes no liability or responsibility for direct or indirect, special, consequential or incidental damages or for any other damages relating or arising out of any action taken as a result of any information or advice contained in this commentary. The author disclaims any express or implied liability or responsibility for any action taken, which is solely at the liability and responsibility of the user. In addition, the author of this piece currently trades for his own account and may have financial interest in the following derivative products: (corn, soybeans, soybean meal, soybean oil, lean hogs, live cattle, feeder cattle).
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