By Dennis Smith
312-242-7905
Friday, April 8, 2022
GRAINS:
Upside breakout? After trading lower all night the corn market, May corn, looks poised to challenge key resistance defined as a close over 760. May bean oil is attempting to break out of a possible bull flag formation on a close above 7330. The USDA will issue their monthly supply/demand report today at 11:00. Look for slightly lower ending stock projections. This will set the table for a bullish to very bullish new crop supply/demand table which will be issued next month. Palm oil, both cash and futures traded higher last night. Veg oil prices in Europe were all higher. The situation in Ukraine is long-term bullish and the survey indicating that corn acreage will be at a 4-year low in the U.S. is bullish. Reports also indicate that farmers in Ukraine are shying away from planting corn knowing they’ll not be able to export it. The new concern in Ukraine is raising enough food crops to prevent them from starving. Russia appears bent on sealing off Ukraine from the world. I’m currently studying and contemplating when to roll our May bean oil into July. Stay tuned for this recommendation.
LEAN HOGS:
After Easter I’m expecting demand for U.S. pork to improve both on the domestic front and in the export market. Production will soon begin to drop seasonally and of course the smart end user is fully aware of this. At points this summer hog numbers will become extremely tight. The current strategy includes packers marketing their packer owned hogs as heavy as possible. This will become very difficult when summer arrives. At some point the world will come to view U.S. pork as “cheap”. Hams at 60 cents are likely below cost of production for all of our export customers. Eventually, this will matter. The premium has come out of the board in the wake of the bullish hog & pig. This is mostly due to the slow down in exports clearly evident in the trade data through Feb. Look for the USDA to lower projected pork production in today’s meat supply/demand table. Regarding futures action today, I don’t have any specific outlook or expectation other than strong support in the fall/winter contracts.
LIVE CATTLE:
Open interest was up 1,075 cars on yesterday’s strong performance in LC futures. The build is moving into the fall contracts. Cash steers have traded at steady money this week with prices holding at 138-140 for about four to five weeks now. Packers continue to see margins improve as the beef edges higher. It’s nice, very nice to be a packer right now. This won’t last. Look for demand to surge post-Easter. End users have some real opportunity to book beef at reasonable prices and discount for the big summer holidays. Many in the cattle business remain downtrodden and bearish. This tells me that we’re about to rip higher. Placements are currently dropping off. By May 1, it’s possible that on-feed will be only 95% compared to the current 101%. Does the board begin to anticipate this? If you’re long Apr futures I suggest rolling to Oct, today. I look for a mixed early trade with buyers surfacing, especially in the deferred contracts by the closing bell.
For a free 30-day trial to the evening livestock wire send an email to: dennis.smith@archerfinancials.com
