by Dennis Smith
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As penciled out in the evening wire, we are actively hedging a portion of expected new crop corn and soybeans.
Cash was down $1.25 yesterday and called flat to lower for today. Certainly, there’s no urgency in the cash hog market at this time. After all, there’s 3 million hogs backed up in the country, so we believe. Weight data comes out in the morning. I won’t know what to think if weights drop again. This week’s kill is projected to reach 2.481 million pigs, surpassing last week’s expanded kill of 2.442. This kill would be up about 2% from last year. While this is a vast improvement as workers return to the work place, new rules within the plants will prevent the kills from expanding further, preventing the prospect of chewing through the backlog. Futures are in the processing of bottoming out.Most primal pork cuts have declined to attractive levels that will spur demand. All hog contracts are undervalued in my opinion. An updated meat supply/demand report comes out Thursday morning and a quarterly hog & pig report comes out two weeks from Thursday.
There were zero deliveries posted against the June LC contract on FND. The show list is about the same size as last week. Negotiated volume last week was huge at 147K. Open interest had a very small net change yesterday, down 300 contracts. Look for the cash steer market to see some pressure again this week. Beef values continue to decline, continue to search for a value that spurs demand. The beef feature activity index, a measure of the beef features at retail, something I’ve never monitored before, plunged to a new low last week. This is a direct result of the high jacking that took place in the wholesale market during May. Futures are discount to cash but cash is working lower. Beef is still working lower. Demand is due to peak any minute now as it always does at this time of year. Most active Aug is testing support at 9600. It won’t hold long term in my opinion. Exactly when and how it penetrates is a guess. We’ve been hedging in Aug LC, a few hedges in the Oct LC and in the Aug FC. There was no cash steer trade yesterday. The average price paid last week turned out to be $1.12, lower than expected. Mixed to lower is our expectation on the open.
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