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OI Continues to Drop in Live Cattle


Hogs are trading into the gap created by the bullish hog & pig. This may work as a support level. There is nothing bullish going on. Current hog supplies are enough to satisfy current demand. Current demand is eroding with exports turning soft. Labor remains a problem. There’s a glut of bone-in product. Hog numbers, seasonally, are on the rise. Weights are on the rise. The next major seasonal low is due about thirty days out. If we bounce hard today, I’ll look at a new short spec position.


Open interest was down 550 contracts from yesterday’s performance. Total LC open interest, hitting a new low, at 284k, is only 30k larger than lean hog open interest. The outlook for the cash steer market this week is firm to higher. Asking prices are sitting at $1.25 with many expecting higher. Beef is showing signs of stabilizing. Futures are anticipating a change/shift in the fundamentals. The Dec contract has staged a double doji just below resistance defined by the 40-day and 50-day moving averages. Eventually the market will plow through this resistance and we’re off to the races. The monthly FC chart displays a beautiful head and shoulders bottom formation. The upside target here is 200. Our orders trying to purchase the Jan 186 calls at 40 were not filled. I’m going to re-tool and come back at noon with a new trade strategy, most likely a bull call spread. For now, no new trade rec.


Palm oil futures pulled back overnight in both cash and futures. Dec soybean oil is lower and trading below my buy entry zone of 6100-6050. If you want additional length, now is the time. Corn is slightly lower, soybeans in the tank and wheat is slightly higher. I’m bullish wheat and we’ll look to establish a new long position, perhaps buying Dec calls/selling puts. I’ll watch the action in the wake of the supply/demand. So, look for a new bullish wheat trade idea in tonight’s evening wire. France just adjusted their wheat crop lower and it appears highly likely that Russia will slap a quota on Russian wheat exports starting in Feb. Russia is dealing with inflation north of 7%. Obviously, the grain report will set the tone for today. So, at this moment, other than adding to your length in the bean oil, I have no new trade recommendations. Corn basis is actually firming up right in the middle of harvest. Producers are placing the crop in the bin with very little cash movement occurring.

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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