Open Interest Surged Higher in Live Cattle, By Dennis Smith

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Thursday June 16, 2022 

GRAINS: 

The weather is setting up to become a major problem for the corn market. The ridge holds in place, cutting off meaningful moisture for the majority of the Corn Belt for the rest of June and into early July. Futures must react now. Prices must stay elevated to shut down usage. Dec corn futures are working through the 730 resistance as I type this comment. A close above 730 will signal a test of contract highs. Soybean prices touched all-time highs last week, yet evidence continues to surface that the demand for soy is not declining. May crush was up nearly 5% from last year. Bean oil is flat with palm oil futures slightly lower last night. Cash palm oil was flat after breaking hard earlier in the week. We are caught in a bad soybean oil position. For now, we’re holding. First chance we get we’ll have to put in a sell stop. I cannot explain the poor action. We’ve been bullish corn for weeks. Now is not the time to add risk to the account.  

LEAN HOGS: 

Cash was up .50 but the carcass was down $2.88. Sorry, but hog futures will not trend upward in meaningful fashion without some leadership from the carcass. I have little interest in hogs at this time. I’m looking to go short but not willing to step into the market with a short in the middle of a monster heat wave and just ahead of the hog & pig report which should be bullish. Open interest in hogs was up 459 yesterday. Wow, an increase in OI is very rare these days. Consider the fact that total OI in lean hog futures is down 109,000 cars from this time last year. I’m not the only guy losing interest in trading hogs. No rec.  

 

LIVE CATTLE: 

Unlike the hogs, live cattle and feeder cattle is where the action is. Open interest in LC futures from yesterday’s gap higher session and powerful strong close was up 4,158. Volume was active but not huge at 58.9k compared to 40.6k in hogs. Feedlots in the south are asking $1.40 for remaining cattle. Sadly, the list is smaller in KS due to large death losses due to heat combined with humidity. Tops yesterday in the north reached $236 dressed and $1.46 live. These prices are $8 to $10 higher than last week in the dressed meat. Weekly beef export sales were pegged at 17,400 MT, down 12% from the 4-week average. However, shipments were solid at 19,800 MT, up 7%. China remains involved in the U.S. beef market. Feeders have traded sharply higher at auction barns this week. Consider this information coming out of OK City. At the auction this week 600 weight cattle comprised 64% of the 8000 head up for auction. This week last year, 600 weight cattle made up 82% of the 10,000 head available for auction. Sources indicate that light weight calves, at auction today, will sell north of $200. Fats and feeders may not gap higher as they did yesterday but, IMO, they will close higher to possibly sharply higher. A note of caution; don’t sell LC futures because of a lower stock market. I’m very bullish.  

For a free 30-day trial to the evening livestock wire please 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.