Cash Hog Prices Expected Higher Again Today By Dennis Smith
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Tuesday March 19, 2019
Cash was up $1.75 to $2.00 yesterday and look for another round of cash strength again today. The pork carcass jumped by $3.50 with all pork cuts trading higher. The market is feeling the new demand and suddenly 2.5 million pigs per week is not enough pork. The dramatic move upward in futures is in sharp contrast to the depressed market from last fall through February. Extreme losses were incurred by hog producers. This makes me wonder if we’ll see a friendly/bullish hog & pig report next week. This would really throw fuel on the fire. Sources indicate that ASF continues to spread in China and it’s also spreading rapidly in Vietnam. The CME, in their wisdom, is raising margins on hog futures. This only puts more pressure on the short hedger to blow out of positions. Our trading strategy is two-fold. First, start slowly taking profits on long call positions and second producers need to start laying into puts for summer production. Look for significant upside follow through today. The action in the April contract including the bull spreads signals this rally is “for real”.
Fresh contract highs were scored in all LC contracts with the exception of the April. Open interest increased by nearly 4,900 and stands record high at just over 440,000 contracts. There’s nothing bearish about this fact. In the face of a smaller show list the packer intends to kill more cattle this week….nothing bearish about this either. Finally, choice beef scored a new recent high yesterday after many had declared a top in the beef….nothing bearish about this. Obviously, I’m expecting the rally to continue. Aug FC appear to be headed for resistance at 15700. A cattle-on-feed report comes out Friday.
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