Wednesday June 29, 2022
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 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.
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 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%.
Open interest surged higher in LC futures yesterday, rising by 2,889. That worries me a bit as the market performed very 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 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 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.
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