Cash Steer Trade Established Friday at Lower Than Expected Prices By Dennis Smith
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Tuesday January 22, 2019
Cash is called steady to firm for today. The weekly kill is projected to come in at 2.519 million compared to last week’s actual harvest of 2.508. So not a large change in hog numbers coming down the pipe. Another case of ASF was reported in a new province on Sunday in China. The disease continues to spread. In a surprise, China reports that their pork output fell nearly 1% in 2018. Massive herd liquidation is currently taking place flooding the market with pork. Longer term, pork production in China will take a big hit. Futures appear to be carving out a bottom. The strong action last Friday occurred on volume of trade of 58,600 with open interest down 800 cars. Active trade was noted in the calls, with a total of 9,100 calls trading compared to 4,800 puts. Look for upside follow through in today’s market.
The latest information is that cash traded in numbers at $1.24 late Friday. This must be considered negative toward the open today in futures. Most in the trade, including me, was expecting a better cash performance. The USDA reported that only 4000 traded in TX at 124, 8800 in KS at 124, 20600 in NE at 124 and at 197 with IA 20900 at 123-125 and at 197. Not impressive numbers. This week’s kill is projected to come in at 619,000 or about exactly even with last week’s harvest of 619,000. The show list is larger in TX and about the same in KS, NE and CO making the total show list larger this week compared to last week. The bull spread weakened on Friday which was a negative signal. Initially look for selling today with a lower open likely as traders take the cue off the lower than expected cash performance. There was nothing fancy in the options trading from Friday to report.
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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. In addition, the author of this piece currently trades for his own account and may have financial interest in the following derivative products: (corn, soybeans, soybean meal, soybean oil, lean hogs, live cattle, feeder cattle).