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Sharp Rise in Lean Hog Open Interest is Very Positive

by Archer Financial Services | Oct 02, 2018

by Dennis Smith
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LEAN HOGS

China is on holiday for the rest of the week which means we’ll get nothing in the way of ASF updates. The less we hear from the Chinese the more you can bet the disease continues to spread. The Chinese have not been forthright in sharing information as they battle ASF. Cash was steady yesterday and called steady to firm for today. The cash is just not turning lower mostly because butcher supplies appear to be very current with the exception of Smithfield. Last week’s kill was revised downward by 8,000 pigs making the weekly kill up just over 1%. Most in the trade expected a harvest much larger than this. Pork demand is geared up for more pork and now, suddenly, most pork cuts are in tight supply. The cutout probed into new recent highs yesterday, quoted up .97 at $81.05. Futures were technically strong yesterday with the new USMCA trade agreement paving the way for buyers to enter the market. Volume was active at 69,500 and open interest poured into the hog market with total open interest rising by just over 8,400 cars. Consider this bullish, very bullish.

LIVE CATTLE

In the wake of the USMCA trade agreement most commodities rallied smartly with two exceptions, Oct and Dec live cattle. These contracts rallied sharply but could not/did not hold their gains. Indeed, the volume of negotiated trade from last week was larger than expected at 124,400. Indeed, the show list came in larger for this week than last week. Indeed, many feedlots received $1.11 for their cattle last week when higher money was expected. Indeed, beef trimmings traded sharply lower yesterday although the choice beef cutout did find traction off of Friday’s new recent low value and edged higher by $1.20. Indeed the Oct and Dec formed doji type chart patterns yesterday looking dangerously like a top. The weekly kill projection is coming in lower than last week at 640,000. Some plants will be down for cleaning, cooler cleaning this week. Finally, packers have the ability to draw upon contracted supplies this week. I’m not expecting a higher cash steer trade later this week. Live cattle volume yesterday was marked at 69,900 with open interest rising by 4,200. Technically, this is friendly.

   

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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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