Written Commentary
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Thursday April 1, 2021
LEAN HOGS:
Hedge selling pounded the summer hogs early yesterday but prices came back strongly with the June down 70 but 140 off the session low. Hedgers keep selling the hogs and they keep getting run over. Open interest was up 1,613 yesterday. On a test the contract high in the April we’re recommending to take some profits ahead of the long weekend. April hogs go off two weeks from today. Hold all June calls. Given the theory that corn prices will be forced higher, the Dec and Feb 22 contracts are undervalued. The value of the carcass reached a new high yesterday at $108.97. Weekly pork export sales were very large at 61,000 MT, a marketing year high and up 43% from the 4-week average. Looks like we gained some business from the Suez Canal debacle. China booked 29,700 MT followed by Mexico taking 15,800. Exports were solid at 40,400 MT, up 2%. China shipped 11,900 MT followed by Mexico at 9,900 MT. These numbers should contribute to a higher open in futures today.
LIVE CATTLE:
There was not much cash steer trade yesterday. Prices thus far have traded from 116-118 in the live market with some $184 in the meat on Monday. IMO, we should see a live market established today or tomorrow at 118 in the south and higher than this in the north. I’m looking for the cash steer market to jump substantially during April and into May. We’re long April 120, 121 and 122 calls. Our plan is to exercise calls that are in the money at the close today, taking futures and then rolling into the June on Monday to avoid the threat of delivery. We want to be long as the pent-up demand is unleashed. Weekly beef export sales were 18,700 MT, down 15% from the 4-week average. Japan was the largest buyers followed by China. Shipments were 18,600 MT, up 1%.
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