Dennis Smith from Archer Financial Services, January 7th 2020

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Large Volume and Higher Open Interest on Cattle Rally By Dennis Smith

Follow me on Twitter @denniscattle

Tuesday January 7, 2020

LEAN HOGS:

Hog futures pushed into new lows early yesterday but recovered and spent most of the session slightly higher. Volume was 44,300 with open interest rising by 2,500. I consider this action and change in OI supportive. If I’m correct about huge offtake early this month, it should become clearly evident in the product arena by the end of this week. Cash is called flat to possibly lower. The pork carcass was slightly higher. China needs pork and there’s nothing holding them back once phase one is signed. This is expected to happen one week from tomorrow. The latest CME lean hog index stands at 5919 compared to Feb futures which settled yesterday at 6860. Key areas to watch are 7100 in Feb futures and $83.00 in the pork cutout. We’re in the process of covering short calls in the April which leaves up outright long calls and ready for a major rally, should it occur.

LIVE CATTLE:

Yesterday’s impressive rally in LC occurred on active volume of 85,300 with open interest surging upward by 5,200 cars. So the rally has technical merit which should see upside follow through today. Several contracts posted fresh contract highs on the rising open interest including Jan feeders. An aggressive kill is on tap again this week in the wake of very large negotiated volume of trade last week. In addition, adding fuel is the double edged sword of smaller show list numbers and expectations for an impressive jump in wholesale beef prices this week. Look for upside follow through today.

For a free 30-day trial to the evening livestock wire that includes a midday pork and beef update please send an email to: dennis.smith@archerfinancials.com<mailto: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.

 

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