Lean Hog Open Interest Declining on Lower Trade

by Archer Financial Services | Feb 01, 2018

by Dennis Smith
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Take a look at the charts and the Feb is completely different looking than is the April lean hog chart. Feb is solid as a rock and April looks poised to test major support. Slaughter has been aggressive this week with Monday at 466, Tues at 467 and yesterday’s kill at 463,000. The product has been stable and, frankly, holding better than expected. Weekly pork export sales were good as reported this morning. On a trade below 7200 in the April we plan to begin accumulating calls. Longer term, look for continued strong demand for U.S. pork, when eventually combined with reduced seasonal supply, to likely sponsor an impressive uptrend. 


There has been some cash trade on both Monday and Tuesday of this week with packers paying $1.26 in the live market, steady to down 1 cent from tops of $1.27 paid last Friday. A few cattle appear to have traded at $200 in the meat yesterday which is fully steady with Friday’s trade. There was no sales on the FCE yesterday. The beef has been steady to firm. Finally, the bi-annual cattle inventory confirmed that expansion continued last year in the beef herd but it also confirmed that the expansion is slowing. There’s a very real chance that the multi-year expansion may end this year. The futures action has been disappointing but there’s no reason to panic. Look for a mixed to lower early trade but we simply don’t look for futures to decline much further, in the short term. Longer term, it’s going to be hard to stay bullish in the face of record large production. Beef export sales were excellent. Again, look for a mixed to lower early trade likely followed with some pretty solid buying interest at this basis.  

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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).