MORNING LIVESTOCK REPORT By Dennis Smith
312-242-7905 October 15, 2020
Pork packers improved their margin nicely yesterday with cash lower and cutout higher and reaching a new high for the current move. Butts have developed some weakness this week but otherwise I don’t see any cracks in the armor. Technically, Oct hogs expired on their highs and now Dec will pick up where Oct left off. However, Dec hogs are $10 under the Oct. We may witness a very quick $8 to $10 move upward in Dec futures. Open interest was up over 2,400 cars which is bullish. Weekly export data will not be released until tomorrow due to the holiday on Monday.
While open interest is rising in hog futures as prices rise, open interest is dropping like a stone in live cattle futures and the charts are rolling over…bearish. Total open interest from yesterday was down 1,600 cars and stands at 273,226. Record high OI in live cattle, from earlier this year, stands at 400,453. This “trend” is expected to continue pressing and depressing live cattle futures lower. Cash trade was established everywhere yesterday at 108 and at $169. It appears the $1.09 trade that occurred Monday in TX is the high for the week and possibly, quite possibly the high for a while. Jan FC closed into a new recent low yesterday. Most active Dec LC has settled below key moving averages in two out of the last three sessions. A close below 11000 will be the nail in the coffin. We like establishing bearish option positions for both spec and hedge player.
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