Big Move Down in Hogs, Small Decline in Open Interest By Dennis Smith
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Tuesday June 4, 2019
Where are the hogs coming from? The weekly kill is projected to be up over 6% compared to last year. Packers are using the numbers to their full advantage, cracking the cash lower. The cash was down .50 to $1.00 yesterday and guess what, it’s called lower again today. The cutout was up over $2.00 yesterday so margins took a big jump into the black. Traders continue to sell out of losing long positions but with a very small change in open interest, someone is willing to take the long position at the lower price. I have no clue who the major players are. My guess would be that small specs are getting hammered, taking losses while commercials are going long. The COT data does not verify this, however. Volume was 67,000 with open interest down 800. Basically open interest is dropping out of the June and July with a build in open interest in the Dec, Feb and April. I have no outlook, no expectations going into today’s trade.
With June futures sharply discount feedlots continue to buckle at the first low ball packer bid. The bid surfaced yesterday at $1.13 and guess what, packers bought cattle. That’s down $2 from the bulk of trade last week. Yesterday’s volume was 78,700 with open interest peeling away, down nearly 1,800 cars. Lower open interest was noted in the June and Oct contracts. My sources suggest a weekly kill of 655,000 but I’ve heard other talk of a kill as large as 670,000. The negotiated volume last week was close to 100,000 with the show list about the same in the south but a bit larger in the north. Honestly, there’s just nothing good to report, no real reason to step into this market from the long side. In the middle of May I was described as “crazy” to sell futures after missing a ten day decline. We’ve got over $6 in these shorts. So we continue to hold with no reason to cover and certainly no reason to go long for the spec trader. Beef is expected to trade mostly higher this week as Father’s Day demand absorbs the big supply.
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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).