OPEN INTEREST DROPPING IN HOGS, By Dennis Smith

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312-242-7905 

Friday, October 7, 2022 

LEAN HOGS: 

The Sep unemployment rate stands at 3.5% and the U.S. economy created 263,000 jobs during Sep compared with expectations of 275,000. No matter how you slice it, no matter what the stock market does today, this information is bullish toward red meat demand. Open interest in hog futures dropped by over 3k yesterday on the sharply higher close. Yes, the bearish traders are running for cover and I’d expect this to continue today. Open interest declined in the first seven contracts, Oct through July. The front end is still way to discount to the CME lean hog index and the summer contracts don’t have nearly enough premium compared to the hog index. At one point this week the Jun hogs were nearly par with the index. Are you kidding me? Weekly export sales were robust with Mexico huge and China in for 10,100 MT. Is this a one-week wonder from China or is this the start of something new and different? The futures market action will answer this question. I’m bullish and expecting another strong performance today.  

LIVE CATTLE: 

As I noted in the hog comments, the U.S. economy continues to create jobs and the unemployment rate resides near a 50-year low. This is bullish for meat demand. Open interest in LC futures was up 815 cars yesterday. OI in Oct was down nearly 1,700. Oct options expire today. There are nearly 3800 146 calls outstanding. Watch for some fireworks if the Oct rallies above 146 into the closing bell. The bull spreads are powerful strong confirming that cash steer prices are heading higher. Beef exports continue to rip. Beef exports during Aug were record high with record high tonnage going to China. Look for a choppy early trade likely followed with a higher close. I’m bullish.  

For free 30-day trial to the evening livestock wire that includes the morning livestock report and midday pork and beef update, simply send an email to dennis.smith@archerfiniancials.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.