By Dennis Smith
312-242-7905
Thursday, November 18, 2021
GRAINS:
Soybeans are trading 5 to 6 cents higher early today. We are filled on our Feb soy 1230/1190 put spreads at 8 cents. The market is currently 7 ¼-7/12 on the put spreads. This is a highly recommended trade for every active commodity account. Why? Because I do not consider the fundamentals bullish. Meaning ending stocks are projected to jump, exports are slowing, and South America is on the road to a record large crop. My sources are penciling in ending stock projections approaching 400 mm. March corn nearly failed yesterday. Play it however you want, I’m bearish. A close over 590 and we cover. A close under 560 confirms a top. We have a week and one day before the Dec wheat options expire. We’re looking to take the max out of our Dec spring wheat $9.00/$10.00 call spreads which were established at 18 cents last June.
- Risk on our bearish March corn option positions is a close above 590. Stick with this. If this market ever closes above 590 we will be recommending to exit.
- Establish the Feb soy 1230/1190 put spread at 8 cents or less. (filled)
LEAN HOGS:
I noticed that open interest was higher in every hog contract yesterday with the exception of the Dec. Total OI was up 1,131. The summer contracts broke through resistance on the rising open interest which is bullish. There’s a drastic change in the forecast for pig prices into spring. Summer hog futures are trading $20 over the Dec. Weekly pork export sales were slugggish at 25,000 MT, down 16% from the 4-week average. Mexico was the largest buyer booking 16,900 MT which is mostly bone-in hams. Pork shipments were very respectable at 34,700 MT, up 6%. Mexico, Japan and China were the top three destinations for pork last week. I’m recommending working orders to take off half of the July hog call spreads at double the money. This will provide clients with a free trade in hogs until the middle of July. Nice.
- Buy Dec and Feb puts for ASF event protection.
- Liquidate half of the July LH 106/120 call spreads at 280 points.
LIVE CATTLE:
All cattle contracts closed higher yesterday. Similar to the hogs, I noticed that OI was higher in all contracts except the Dec. Total OI was up 704. Settlements were all near the session highs and near resistance levels. Possible gap and go upside breakout??
Weekly beef export sales were huge at 25,500 MT, up 58% from the 4-week average. For the first time that I can ever remember we sold more beef for export last week than pork. China was the largest buyer, booking 13,800 MT followed by Taiwan (3,600), Japan and then South Korea. Shipments were strong at 18,200 MT, up 8%. Destinations were South Korea, Japan, China, Mexico and Taiwan.
The cash steer trade has not been established yet with light volume trade at 132-132.5, or the high end of last week’s trade. Perhaps the cash will take a nice jump today. Look for a higher open in futures. Beyond that, who knows. I’m bullish. Technically, a close over 13260 in the Dec will confirm a breakout of a massive bull pennant and signal a move to 136. Technically, a close over 160 in feeders will signal a bottom and a $10 rally to 170.
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