MORNING LIVESTOCK REPORT
By Dennis Smith
Follow me on Twitter @denniscattle
Friday June 5, 2020
CORN AND SOYBEANS: Hedging is advised into the middle part of next week. We’re executing soybean hedge strategies and we’ll outline some specific corn hedge strategies for tonight’s wire. We’re not seeing anything fundamentally, including weather wise, to suggest a major price rally will follow through and plow through major resistance levels.
Stocks are sharply higher after the employment report showed massive job creation instead of losses. This is huge for the meat markets from a demand perspective. Demand for pork has been a feature this week with the weekly load count huge. The cutout has stabilized the last two days after dropping hard. Pork is no longer expensive, in fact, many cuts are cheap. Export data comes out later today. Open interest was nearly unchanged yesterday. I’m bullish and holding bullish positions in the Dec options. By the way, ASF continues to spread in China.
The surge in employment should support cattle futures, at least initially today. The pundits on TV don’t even know what to say. Funny. The cattle fundamental situation, in the near term is not bullish. Demand normally peaks at this time of year. Of course, this is far from a normal year. Nevertheless, up to a million head have been back logged and the back log continues. Packers, being packers, even in the middle of a Justice Department investigation, will continue to cherry pick and knock the cash steer price lower. If it comes off in chucks, as it has this week, the discounted board won’t be discount for very long. Cash traded down to $1.05 yesterday, down $12 from last week’s $1.17 performance. Hedging is advised with greatest need in the Aug LC and Aug FC, in my opinion. Our favorite strategies are listed below.
- Buy Aug LC 98 puts/sell 88 puts/sell 107 calls at 100 points.
- Buy Aug FC 134 puts/sell 122 puts/sell 142 calls at even moneyThe 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.