By Dennis Smith
Follow me on Twitter @denniscattle
Thursday June 25, 2020
CORN: Ideal weather conditions into the middle of July continue to weigh on corn prices. As expected, when 340 in the Dec was penetrated it’s quickly moved to the next support of 330. Sources are suggesting that many producers were waiting for “one more rain” before turning loose of their old crop. Well, those rains will be occurring over the next five days across the Corn Belt. If producers turn aggressive sellers of old crop, futures and basis will continue to grind lower. We’re long the Aug corn 335 puts from around 11 cents. Recommend placing orders to liquidate these positions at 20 cents or nearly a double the money on the premium.
Open interest dropped by 880 cars yesterday. Weekly pork export sales were reported at 24,100 MT, up 3% from the 4-week average. Mexico was the largest buyer last week, booking 8,100 MT with China second at 4,500 with Japan booking 2,500 MT. Shipments were excellent at 29,100 MT, but down 10% from the torrid 4-week pace. China received 10,300 MT followed by Mexico taking 8,800 and Japan taking in 3,100 MT. Monthly export sales will be released July 6th. The quarterly hog & pig will be released today at 2:00. We’ve been accumulating Dec calls ahead of this report. Actually, we’ve been establishing bullish Dec option plays since mid-April, when futures were very close to their contract lows. For your reference the estimates are listed below. It’s my opinion the trade is not nearly bullish enough with these estimates.
All hogs & pigs 104% 102-105
Kept for breeding 98% 97-99
Kept for marketing 104% 102-106
May-May pig crop 99% 94-102
Mar-May pigs per litter 99% 95-102
Mar-May farrowings 99% 95-100
Jun-Aug farrow intentions 95% 93-97
Sep-Nov farrow intentions 95% 93-98
Hogs under 50 lb 98% 88-104
Hogs 50-119 lb 102% 98-107
Hogs 120-179 lb 105% 104-106
Hogs over 180 lb 117% 102-127
The following cash steer trade was reported on the late USDA wire for yesterday. TX 500 at 97 cents, KS 2850 at 95-97, NE 4850 at 95 and 8300 at $155 to $156 in the meat and IA 350 at 97-99 and 3800 at $153 to $156. Negotiated volume stands at 52,200. Weekly beef export sales were excellent at 24,400 MT, up 52% from the 4-week average. South Korea booked 8,200 MT followed by Japan taking 5,900. Lower prices are bringing demand to the beef. Shipments were also excellent at 18,600 MT, up 84% from the 4-week average. Japan shipped 6,400 MT followed by S. Korea shipping 5,400 MT. Open interest dropped by 2850 perhaps as disappointed bullish traders peel away from the first three contracts. Technically, despite the poor close, it was an inside day which makes the action inconclusive. Based upon the expectation of plentiful supplies of heavy weight cattle, peaking demand and a continuation of the erosion in the beef, we’re bearish.
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.