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Total Open Interest Continues to Decline in LC

by Archer Financial Services | Jul 31, 2018

by Dennis Smith
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LEAN HOGS

I can’t come up with much to be positive about regarding hogs. Perhaps that’s when futures will bottom at least for a minute. There’s a ton of reasons to be bearish and short, few reasons to bullish and long. Fresh bellies have collapsed over 40% in six days. Yesterday’s pork cutout was another disaster, quoted down $2.43 at $74.54. Cash was lower yesterday and most are calling cash lower for today and for the rest of this week. The CME lean hog index is dropping like a stone, last quoted at 7217, down 1.29. Volume yesterday was not heavy at 29,000 but open interest increased by just over 1,500 cars. Two items stand out from a bullish viewpoint; futures are trading at very sharp discounts and pork is incredibly cheap. It’s my opinion we’ll likely experience one more pop in the market before we get into the fall hog runs that no doubt will challenge demand to the hilt.

LIVE CATTLE

Cash trade was confirmed last Friday mostly at $1.12, down $1 from the previous week. The volume of negotiated trade was around 73,000. The show list is about equal to last week. Beef packer margins are very profitable meaning they’ll keep killing cattle at an aggressive pace. My sources continue to confirm that domestic fall demand for beef is good and export demand appears excellent. Volume yesterday was 47,000 with open interest coming out of the market. Open interest dropped by nearly 3,600 cars and total LC open interest is very small at 308,000. In the middle of May open interest stood at 360,000. I’m expecting a fully steady to firm cash market when it develops later this week. If correct, this should sponsor upside action led by the Aug. We are trading accordingly.

  
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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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