Written Commentary
Follow me on Twitter @denniscattle | 1-312-242-7905
LEAN HOGS:
As hog futures turned back higher the open interest was down 1,812. Hog futures will remain on expanded range of trade today because the May close higher than the old 300-point limit. Look for hogs to stretch their legs to the upside today. The carcass moved upward and into a new high yesterday at $114.08. Summer hogs are grossly undervalued given the value of the hog carcass and given current cash hog prices which are rising daily. The best opportunity resides in the sharply discounted fall and winter contracts. Our favorite way to add is by establishing the Dec LH 88/100c call spreads. Cash should be higher and all indications are that product will be higher. I anticipate a steady to firm open followed by a higher close.
LIVE CATTLE:
The weekly kill is projected to come in at 655k compared to 641k last year. Yet the cash outlook for steer prices is steady to lower. Packers won’t let go of any processing margin. This is collusion, textbook collusion, but the justice department is giving the packing industry a free pass. Now the strong basis with cash over futures has the feedlot hitting the first bid. Why? Cause the board says prices are going lower. We were stopped out of long June futures yesterday for a sizable loss. It would be nice if every trade was a winner. I like holding and eventually adding to our bullish option position in the Oct. But for now, I’m done with the lousy June contract. Of the 89k in negotiated volume last week 40k were bought with time. The show list is substantially larger in TX, up 12k with numbers unchanged in KS and NE. No new recommendations at this moment.
For a free 30-day trial to the evening livestock wire that includes a Morning Livestock Report and Midday Pork and Beef Update, 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.
