by Dennis Smith
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The expiring June wiped out a large chunk of OI but total OI on yesterday’s market was up 2000 cars. I thought the action was constructive with all contracts opening lower to sharply lower and all contracts closing well off the session lows. Weekly pork export sales were excellent at 38,600 MT with Mexico purchasing 13,600 MT (hams) and China booking 10,000 MT of U.S. pork. Vietnam bought 1,200 MT which I believe is their largest weekly purchase ever. Shipments were solid at 33,500 MT with China receiving 13,700 MT followed by Mexico which received 9,200 MT. The active pork trade is continuing this week. Yesterday’s volume in the pork was the largest daily volume since Nov of 2014. That’s what incredibly low prices will do. I consider the board, the whole board grossly undervalued. Perhaps a bottom won’t be achieved until the hog & pig which is one week from today. Recommend buying the Dec LH 70 calls at 100 points.
Open interest increased by 1000 cars in the LC from yesterday’s trade. Weekly beef export sales were excellent at 20,100 MT, up 67% from the 4-week average. S. Korea stepped in and bought 8,800 MT of beef followed by Hong Kong (2,500) and Japan (3,500). Shipments were light at 8,500 MT. The cash steer market continues to grind lower and we don’t see this changing in the weeks ahead. As the beef continues to work lower packer bids will decline. Futures rallies should be capped off. Hedging is advised.
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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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