Hog Numbers Are Not There; Hog & Pig Wrong, By Dennis Smith

Wednesday January 31, 2024


Open interest in corn was slightly lower on the rally yesterday. Basis levels held steady with slight weakness noted in some locations. The farmer will be the next big seller. Yesterday’s flurry was likely generated by funds taking partial profits on a huge short position. A lack of upside follow through today would be very negative. Mar corn is back to the doji support of 446 which is now the resistance. The market, really, has done nothing on the charts. China continues to diversify for food security. They’re now importing pork and grains from Russia. China continues to do everything they can to reduce reliance on imported corn and soy from the U.S. This will continue and it will drive the price of corn and soybeans lower. My downside target is $4.00. Hold the bearish positions.


There was active option activity in hogs yesterday. Traders are bracing from both a bullish perspective and a bearish perspective. Open interest in hog futures soared higher, increasing by over 6,400 cars. Funds!!!! Yes, the funds are now pouring into long positions. Volume was active at 74.8k, dwarfing cattle volume (53.1k). Open interest in Apr calls increased by 3,205 but open interest in Apr puts soared by 5,522. Hedging, at this point on the charts, is highly advised and many are doing so. The hogs aren’t there. Evidence is growing that the Sep hog & pig report was not accurate. The cull last summer was greater than measured on the survey. This is impacting butcher hog numbers this winter. This makes a great deal of sense, it’s logical. I was mystified at the tepid nature of the contraction as reported in the last two hog & pig reports. On the next major pullback, we’ll pursue bullish call spread positions. Yesterday’s highs may be tough to penetrate especially on a closing basis. Pig prices in China have rallied sharply this week, up nearly 14% compared to last week.


Open interest in LC futures was up 1,791 from yesterday’s trade. The funds are coming back into the market. Open interest in FC was up 1,136. There has been active to very active trade in Feb options this week. These options expire Friday. Open interest in Feb calls was up 2,580 yesterday with the 177 calls up 1,115 and the 178 calls up 1,567. Open interest in Feb puts was up only 1,478 but we did see open interest in the 177 puts surge by 2,206. Which way will it go? Feb settled yesterday at 17800 with no cash steer trade reported. The cattle inventory report is out today after the close. It should be bullish. Any surprises on the report, IMO, will be bullish surprises. The beef is backing up but that’s normal for this time of year. It’s also normal for packer processing margins to suffer during the first quarter. So, don’t get bearish if margins slip into the red. Asking prices for the smaller show list are at 178 and $280 in the dressed market. The normal pattern for the trade is selling during the first 30 to 60 minutes of trade followed by several waves of buying. Stay bullish. I’m looking to unwind profitable Apr call spreads given the chance at 170.

  • Start working orders to liquidate the Apr LC 185/190 call spreads at 170. (paid 70 points on Dec 6)

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