by Dennis Smith
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We are moving into bearish positions for corn and soybean producers. We’re not confident of a market top but this is definitely the time of year that tops are formed. Odds favor a continuation of the poor growing season, in my opinion. However, if I’m wrong then we’ve missed a real marketing opportunity. Consider the following two marginable strategies.
Cash will be lower….again. Cutout was sharply lower….again. Futures volume was 58,800 with open interest down 100 cars. Weekly export sales were good at 29,700 MT. Although this was down 9% from the 4-week average it’s still a solid number. The largest buyer of U.S. pork last week was China followed by Mexico. Shipments were stellar at 27,000 MT, up 14% from the 4-week average. Mexico took 7,900 MT and China shipped 7,300 MT, a new high for China. Shipments need to accelerate to shore up the excessive supply of pork in the domestic market. I have no feel, no read on exactly when the backlogged situation will be cleaned up. It could take another two to three weeks. No recommendations.
Live cattle surged upward yesterday, seemingly taking their cue from feeders which actually makes no sense at all. If corn prices stay high then the demand for heavy weight feeders will turn strong while demand for all other weight classes will decline. Look for resistance in Aug FC in the 13800-13850 range. Resistance in the Aug LC should develop toward the June high of 10715. Oct LC resistance at 10800. Trading in LC puts was active yesterday. A total of 7,500 puts traded compared to just 2,800 calls. The Aug 100 and Oct 100 puts were actively traded. Perhaps LC displays a trading range for the summer, not really trending much. Given a pullback to 10400 and we’ll look to unwind hedges in the Aug LC and perhaps do the same in the Oct LC. IMO protection in FC, in the event of another leg upward in corn prices is necessary.
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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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