by Dennis Smith
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Cash was lower again yesterday, call is down .50 to $1.00. Heat is coming and this is going to restrict hog movement and weight gains over the next week. Might this play as a factor in the cash hog performance next week? We believe it likely will support cash bids, perhaps preventing or at least stalling the slide in prices. The product performance and cutout continues to disappoint, quoted up .25 at $87.66. Today the USDA will release their quarterly hog & pig report. Look for confirmation of expansion which will also confirm record large production for next year. This is not a surprise to the board. Many times these report contain surprises. For this one, I don’t even have a guess as to what it may be. Into expiration look for July hogs to continue to work higher. We are hedged (fall and winter) and will look to add to hedges on rallies into the seasonal high timing.
Yesterday cash steer trade was established at $1.06, down $2 to $3 and the dressed beef market was established from $168 to $170, down $3 to $4.00 from last week. KS was the volume leader yesterday moving over 12,000 head. IMO this cash news will bring selling to the board in the early action today. Bids started our yesterday at $1.05 with offers on show list numbers at $1.10. The trade at $1.06 clearly indicates where the leverage lies, with the packer. On weakness today in the Aug we’ll look to unwind part of our July LC 104 puts (paid 90 points) and we’ll look to add to our longer term bullish strategies in the fourth quarter cattle. Generally, we’d expect feeders to trade weak to lower as well. Look for the beef to continue to grind lower. Choice cutout was down $1.53 yesterday, quoted at $215.30. Choice beef is likely headed toward $200.
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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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