Written Commentary
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LEAN HOGS:
Cash should be higher again today. Cutout edged higher and into a new recent high. The carcass is headed for $100 and it’s doing so much quicker than expected. Today is the final day of the Goldman roll. For reference, the latest CME lean hog index stands at 8676, up .68 with the one-day calculation at 8723. Weekly pork exports were reported at 32,400 MT, down 17% from the 4-week average. China was the largest buyer of U.S. pork last week, booking 10,700 MT followed by Mexico which took 6,900 MT. Shipments were strong at 39,300 MT, up 3% from the 4-week average. China was the largest receiver of pork, shipping 11,900 MT followed by Mexico at 10,000 MT. Corn and meal prices traded lower overnight in China. The rumors and talk is that ASF is on the move and wiping out the herd. This is bullish lean hog futures. Look for a steady to higher open likely followed by another higher close.
LIVE CATTLE:
Beef export sales were pegged at 20,900 MT, up 17% from the 4-week average. South Korea was the largest buyer. Shipments were pegged at 17,800 MT, up 5% from the 4-week average. China was the fourth largest buyer of U.S. beef last week. U.S. beef is cheap in their eyes. The leverage game continues to reside with the packer. Cash was traded at $1.14 and then the good old packer dropped the bid to $1.13, sending a clear message that they remain in full control. They will pay for their sins someday and perhaps sooner than we all expect. I’m watching the Apr/Jun spread closely. If this spread approaches 80 under, we’ll likely take a stab. For today, consider buying calls. Specifically, consider the following play.
- Buy May LC 124 calls at 100 points. These go against the Jun contract and expire May 7th, or 57 DTE. These calls closed yesterday at 107 points.
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