by Dennis Smith
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Cash is called steady. Packers, obviously, are trying to slow down the advance in cash hog prices in an effort to recoup lost margin. My sources indicate that three plants will be dark on Friday, restricting the kill by just over 50,000 pigs. The weekly projection is coming in at 2.480 million pigs, shy of last week’s harvest of 2.504. If China is in the market as we suspect, cutout values should continue to crank higher. The weekly appreciation in the hog carcass, since the week ending March 9th, has been $3.12, $3.85, $8.90, and up $3.54 last week. Yesterday’s cutout was up .82. Also yesterday open interest fell out of the April and June hogs with total OI down 2,900. A SEASONAL LOW IS DUE NOW. Perhaps it was established yesterday. This is one of those days in which you expect, you hope that the trend simply reasserts itself. So I have few expectations and I’m fully willing to let the market do the talking. There’s no fresh news on Trumps threat to close the Mexican border and no fresh news regarding the China/U.S. trade negotiations. Again, simply let the market figure it out.
Nice rally in LC and FC futures yesterday occurred on volume of 62,000 with open interest in LC down 800. While all contracts pulled back off their session highs, after penetrating resistance levels, all contracts still closed higher. Show list numbers are up in the south (up 5,000 head) but they’re down in the north (down 14,000) as calf-fed animals have been set back and they’re as much as thirty days late. If seasonal demand kicks in before these cattle are ready, cash steer prices may surprise most. The industry has been convinced and brow beaten by the packer into becoming bearish just ahead of the best demand timeframe of the entire year. The negotiated trade last week was 85,783, down about 2% from the prior week. Draw a line in the sand at yesterday’s session highs. A close above these levels is bullish.
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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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