Written Commentary
Cash Hogs Called Higher, Expanded Limit in Hog Futures
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LEAN HOGS:
Open interest surged higher in hogs yesterday with the total OI up 6,310. Open interest was higher in every contract. I can’t say or see anything negative about what happened yesterday. Weekly exports were soft with Asia on holiday last week. Sales were only 25,600 MT, down 40% from the 4-week average. Shipments were a bit better at 35,300 MT, down 9%. The largest buyers last week were Mexico, Japan and China. On the shipment side, China, Mexico, Japan and Canada. Packer margins narrowed yesterday and that’s confirmation that supplies of butchers are dropping off. I can’ predict what will occur early today but I’m expecting another higher close. Cash should be higher, cutout should be higher and the index should continue to crank higher. The latest index was quoted at 7912 with the one-day at 7971. Expanded range of trade for today.
LIVE CATTLE:
Beef export sales were soft last week at just 8,500 MT, down 66% from the 4-week average. Shipments were 15,100 MT. Shipments went to South Korea, Japan, China and Mexico. Most active April LC posted an inside day yesterday but the contract opened 50 higher and closed 100 higher. Open interest was up 80 cars. The cash steer market continues to “underperform” the beef complex. Choice beef was higher again, up .46 at $240.75 and into new highs for the current move. Processing margins are somewhere north of $400 per head. I was told that many feedlots are passing on the $1.14 bids. Recommend taking a stab at a long futures position today, but also recommending a sell stop for protection. Consider the following:
Buy April LC futures at 12180, sell stop at 12050 stop.
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