Monday April 22, 2024
GRAINS:
Soybeans scored a double bottom on Friday. Wheat is trying to penetrate resistance defined at Friday’s highs. Bean oil is expected to recover off recent lows. I’m told that wheat prices may be responding to dry weather in Russia. For corn and soy, this is not the time of year for prices to move lower. Typically, they move higher into May/Jun off uncertainty surrounding the upcoming growing season. Rain, beneficial rain is headed for the driest parts of the Corn Belt. While I consider the long-term fundamentals bearish, in the short term I’m expecting a rally. We bought Jun soy 1170 calls on Friday.
LEAN HOGS:
Jun hogs closed on the highs of the week Friday. This market looks ready to go. A close over 10600 will signal a move to the highs. The fund liquidation is complete. The COT report showed the funds net sellers of 6,000 contracts leaving them net long 86.6k. Cash is called fully steady to begin the week. The weekly kill was up 1.4% from last year. Both cash and cutout are trading well above year ago levels. Cash hog prices are up 34% from this time last year and the hog carcass is up 26%. Y-T-D kill is up less than 1%. The demand curve for pork has shifted, it’s increased. We first identified this in early Feb and we’ve been onboard ever since. Open interest in hogs was up 3,902 with open interest rising on every hog contract. Look for upside follow through today. Hold all bullish positions.
LIVE CATTLE:
Placements were 4% smaller than expected by the trade at just 88% of last year. Marketings were 2% smaller than expected at 86%. However, net placements were smaller than marketings, meaning that we have fewer cattle on feed Apr 1 than on Mar 1. Because of two fewer weekdays, the actual marketing number is 95% when comparing on a daily basis. THE REPORT IS BULLISH!!! I’m not sure what the 5-area average cash price will be for last week, but it should be around $1.82-$1.83. Both Oct and Dec LC futures are priced well below the cash. These contracts are grossly undervalued, IMO. In addition, the industry has GRASS FEVER. This means that many cattle will be turned out on grass for lower cost of gain. In other words, Apr placements are likely to be lower as well. Math is changing quickly. Cash steers traded from 180-183 in the south on Friday and from 181-184 in the north. Dressed trade in IA occurred from $292-$293. Seasonal demand is necessary to sponsor and support a major rally. But the deferred contracts should lead the way today. I expect our buy stop orders (18190 in Dec) to get triggered today. Look for a firm to higher open in Jun and Aug and sharply higher in Oct and Dec. All contracts, including feeders look poised to gap higher.
- Working orders buying Dec LC at 18190 stop.
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