by Dennis Smith
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Cash hog prices were up $2.00 yesterday and they’re going to be higher today, perhaps another $2.00. Hurricane Florence is huge and actually much more powerful than what I realized 24 hours ago. Smithfield will kill and process hogs today and that’s it, they’ll be down for the remainder of the week. Operations next week, of course, will depend upon the level of flooding, damage and power outages that occur. Perhaps some animals will be shipped west for processing but this is going to be a major disruption to processing. While privately I worry about hogs getting backed up that’s not going to be the concern in the near term. Look for cash to remain strong and look for product to likely find legs and jump higher. Futures volume was very active yesterday at over 95,000. This is the largest daily volume since the market was pounding into fresh lows in the middle of July. Open interest was down hard in the Oct as shorts run for cover in the face of exploding cash bids. Given the extremely bullish backdrop of the ASF situation that is currently unfolding in China, given any further pullback in futures we’d strongly recommend adding to current bullish positions.
Live cattle volume yesterday, at 86,000, was active but far less than the action in lean hogs. Open interest edged higher by 1,300 cars. The show list is smaller this week and in fact is smaller than what we expected. Numbers are down 15,000 in NE, down 7,000 from last week in KS and down 4,000 in TX. The total list is estimated to be 244,800 versus 271,500 LW and 279,400 LY. These numbers should support the cash steer market this week. Look for a fully steady to firm tone to likely develop. Negotiated volume last week was respectable at 127,600. Feedlots are current and weights are not a problem. Beef demand continue to impress. Both domestic and export demand are outstanding. Granted, hurricane Florence may disrupt consumption this week. We continue to approach LC from a trading range perspective. Given a move into the 11500-11550 range basis the Dec LC and we’ll be initiating some hedges for clients.
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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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