June hogs go off the board one week from today
By Dennis Smith
Tuesday June 7, 2022
Corn traded lower all night in reaction to the good crop rating as released yesterday afternoon. The crop is caught up. However, at least 1 million acres will be lost and likely 2 or more million. Emergence is behind the 5-year average. It will all boil down to the weather as is the case every summer. However, it also appears that a good crop this year will not change the tight ending stock situation. I contend that prices need to remain elevated to discourage usage to prevent an extremely tight situation from possibly developing. Talk of a grain corridor will hit a peak with meetings scheduled for tomorrow. The UN is pushing the idea, but my sources indicate it’s very unlikely to happen. Russia appears to be trying to shift the blame away from themselves. Cash palm oil prices were higher overnight as well as palm oil futures. IMO, the overnight lows, 8058, will represent strong support for the July bean oil. The fund roll starts today. The weather forecast is starting to show a ridging pattern consistent with La Nina. A weather threat, should one develop, would send corn prices into all-time high territory.
Open interest edged higher by 882 cars on yesterday’s lower open and lower close in lean hog futures. Cash was mostly higher yesterday with the bottom end of the cash range up $6.00 and the top end of the range up $1.00. Prices out west (average) were quoted up $1.50-$2.00 with the national market unchanged. June hogs go off the board one week from today. For reference, the latest CME lean hog index stands at 10734 with Jun paper about 200 over. I don’t have a strong opinion on where Jun will go off. Chinese pig prices continued to creep upward, and piglet prices are up 43% over the last 30 days. This could be a leading indicator suggesting that production is starting to drop off. I’m looking for a seasonal high toward the end of this week. Odds favor some strength into this time frame. For now, no new rec.
Open interest in LC futures was down 657 cars on the pullback in prices yesterday. Feeder open interest dropped by 365. Look for strong support on further weakness in feeders. My support is on either side of 17500 basis the Oct. The show list is smaller this week. Packers are gearing up for a huge kill and last week’s kill was the largest Memorial Day weekly kill going back to 2011. Weights are dropping and the industry is moving toward a current marketing status. This summer represents a major transition from oversupply to undersupply. How quickly the industry is transformed is the great unknown. Futures markets tend to figure this stuff out quickly, way before the fact. Which is why we started buying Apr futures late last week. I’m also bullish feeders.
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