Hog & Pig Estimates are clustered near 99%, By Dennis Smith from Archer Financial Services

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312-242-7905 

Wednesday June 29, 2022 

GRAINS: 

Folks, the weather forecast through July 12 is NOT bullish.  If corn does not get a major shot in the arm from the acreage number tomorrow, we will exit the recently established Aug corn 700 calls. We paid 17 to 20 cents to buy these, looking to risk 10 cents. The highs for corn are in place. Without a bullish weather situation, the risk is to the downside. We did the right thing by baling out of all spec length on the collapse in prices last week. Stay out of the bean oil market as this market should correct to the downside further. Acreage numbers come out tomorrow at 11:00. If corn acreage is pegged below 90 million, corn prices could shoot 20 to 30 higher in quick fashion. Stay away from the long side of the grain board. Do not initiate any new marginable positions. In fact, I’ve not recommended a new marginable position for a couple months.  

LEAN HOGS: 

Open interest in hogs was up 1,069 on the lower close. The trade is turning on the market. Summer hogs should be headed lower into late summer barring a shocking bullish hog & pig report. Even if the report is bullish, that did not prevent the market from topping at the end of March. That is a major top. One may not like it, one may not believe it, but the only thing that can/will drive prices, eventually, to take out the spring high is Chinese export business. With July at 11000 and Aug at 10400, we’re still high from a historical perspective. Prepare to hedge summer hogs. The cutout was down $3.56 yesterday and the carcass has lost nearly $7.00 so far this week. Cash was higher yesterday, but with this kind of cutout performance packers won’t be chasing hogs much longer. The hog & pig comes out today at 2:00. All estimates are clustered around 99%.  

LIVE CATTLE: 

Open interest surged higher in LC futures yesterday, rising by 2,889. That worries me a bit as the market performed very sluggish yesterday, posting session lows on the close. Aug futures settled below 133 with the cash steer market trading from 138 to 146 yesterday. The kill is running strong with 125k killed Monday and 126k killed yesterday. The weekly harvest is projected to come in at 655k with some suggesting the actual will be higher. Feedlots are current. The supply of 120+ cattle is up 1% from last year. However, we’re working through the cattle in quick fashion. Production has been large yet the beef complex has not cratered. Choice beef is up about $1.50 so far this week. Packer margins are highly profitable. My recommendation to buy Aug LC 133 calls at 220 points is aimed at accounts that are not already loaded with bullish cattle positions. If you’re already long, forget about the Aug calls. Feeders failed to take out resistance this week. I’ve not given up on this market, but it’s been very disappointing thus far. The weather pattern is turning bearish toward corn prices.  

For a free 30-day trial to the evening livestock wire send an email to; dennis.smith@archerfinancials.com  

 

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.