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Choppy Trade in Lean Hogs


By Dennis Smith | 312-242-7905 

Follow me on Twitter @denniscattle


I’m expecting another choppy trade in lean hog futures today. Overall, the bullish environment should drive prices higher. Summer hogs bumped up into contract highs yesterday before pulling back. Front month April pulled back and appears to be consolidating. The extreme weather will subside by early next week. Packer margins remain profitable, look for aggressive Sat kill efforts to quickly absorb the 150k hogs that have been backed up. Prior to the cold snap packers were showing clear signs of stress regarding a short supply of butchers around the corner. So, the scramble has been delayed a week or two. We’ve been accumulating Apr hog calls but will now rest and watch, waiting for confirmation. Despite the lower cutout value yesterday my sources are indicating that hams and bellies are tight. Despite being quoted lower for two days, the carcass is still higher for the week.


By early next week the weather will be returning to normal. Cattle have been hurt, they’ve been set back, that is they’ve lost weight. This is pretty much the case for call cattle on feed. Perhaps in the wake of the cold snap this fact will help swing leverage toward the feedlot as they deal with greedy packers. Beef prices should peak in the next couple of days and then see a general pullback from the highs. I’m told that beef business for export has slowed due to the spike in prices. Weekly export numbers will be released in the morning. We’ve taken a round of profits in the April futures and options. I have no new trade recommendations. Feeders appear to have topped. We’ve been hedging feeders. On-feed comes out tomorrow. Estimates can be found in last night’s wire.

For a free trial to the evening livestock wire please send an email to: dennis.smith@archerfinancials.com

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. This report is a solicitation. 

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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