Dennis Smith from Archer Financial Services, November 19th 2019


Monthly Cattle-On-Feed Due Out Friday
By Dennis Smith

Follow me on Twitter @denniscattle

Tuesday November 19, 2019

Cash looks steady to possibly down .50 but not sharply lower. Should packer break the cash from here they’d likely be facing a justice department investigation. Packer processing margins are record high…..they’ve never been better and over $90 per head. Cracking the cash, steepening the losses absorbed by independent producers would not be a wise move. This week’s kill looks to come in slightly lower than last week. Next week is a holiday disruption. One or two weeks in December may challenge the record kills, but that should be it. Futures volume yesterday on the carnage was 64,700 with open interest increasing by 1,250. The cutout was up $1.01. For reference the latest CME lean hog index stands at 5924 with Dec futures closing at 6275. So the board is still sending the signal that cash will bottom…soon. The talk is a bit friendlier toward a phase one deal being hammered out. An executive from the bond trading firm Pimco went on record stating that Trump understands how important signing a deal is. I have to assume he has a better connection to the President than I do. No recommendations.

On Friday the USDA will issue a monthly on-feed report and a cold storage report. On-feed is not expected to be friendly with placements up substantially. Most in the trade are expecting a steady cash steer trade this week. The odds favor a downward correction in futures. Yesterday’s volume in futures was 67,900 with open interest up nearly 4,000 cars. It has been eleven sessions since the Dec posted a fresh high. Feb is $10 over the cash which is historically out of line…to high. Rising placements, historically strong premiums and a high likelihood that beef will top for a moment should usher in the sellers.

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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).


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