by Dennis Smith
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Cash is called fully steady with a firm tone. Some mechanical problems yesterday will result in a larger Saturday effort. Packers still need hogs for late week delivery and the supply of butchers is getting tighter. Last week’s kill was revised downward by 5,000 and in combination with yesterday’s kill of only 449,000 should work to clean up the product. What stands out to me is the strong performance of the bull hog spreads with the June contract gaining on everything. This tells me the cash is ready to move higher. This week’s kill is projected to come in at 2.332 million compared to 2.327 last week. A closer over 7560 in the June is necessary to trigger large buyers.
This week’s kill is projected to be another huge effort at 646,000 compared to last week’s kill of 647,000. The show list is larger with numbers up 12,000 in NE, up 7,000 in KS, unchanged in CO and down 1,000 in TX. There’s no read yet on the cash steer market for this week. It likely will be lower. Futures can’t hold a rally and we continue to strongly recommend hedging in the Aug and Oct timeframe on any bump. We’ve already hedged the feeders. They will not hold up this summer when cash steer prices drop hard. We continue to hold the bull spread, long Jun/Aug LC as we have no hedges established against the June contract. Look for a two-sided trade. The beef is trading at its highest level since June 26th. Once seasonal demand is complete, this is not going to end well.
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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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The risk of loss in trading futures and options on futures can be substantial. Each investor must carefully consider whether this type of investment is appropriate for them. Past performance is not necessarily indicative of future results.