312-242-7905
Wednesday, May 11, 2022
GRAINS:
The grain board is higher as the trade comes to grips with several fundamental items. First, the war will not end soon, it’s becoming a war of attrition. Second, more than 70% of the corn crop will be planted past the optimal yield date. Third, the veg oil market is in a crack with no quick solutions available. Fourth, the USDA supply/demand should be friendly when issued tomorrow. Fifth, there’s no evidence, despite highly elevated prices, that demand for U.S. corn is slowing. Finally, there are unconfirmed rumors, from Elon Musk, that China is easing dramatically the COVID lockdowns in Shanghai. This would be an extremely important and bullish development if accurate. We’ve added to the bullish position this week by establishing the Aug corn 810/860 call spread paying 8 cents. It’s currently trading at 9 ½ cents. This adds no margin risk to the account.
LEAN HOGS:
Cash hog prices were quoted up $1.50 to up $2.25 yesterday with the average cash and the top end cash both reaching new highs for the year. Yet the cutout tumbled by $4.20 off weakness in hams and a sharply lower belly primal. Open interest on the mostly lower close yesterday was down 1,327. Note that the bull spreads showed some strength with Jun higher while the rest of the board was lower. The comment from Musk, if confirmed, would be bullish to very bullish. The Chinese COVID lockdown, now in its sixth week, has become a major bearish influence on hog futures. The bull spreads are smack on their lows including the July/Oct. Watch these closely for a bottom.
LIVE CATTLE:
Active trade in the south at 138-140 with KS moving numbers. Tops were reported in IA at 142. The beef was lower, but the volume of boxed trade was moderate to active. Open interest on the selloff yesterday dropped over 4,100 cars. Two more days for the silly Goldman Roll. RAIN IN THE PLAINS! This four-word development can change the course of the cattle market. Plentiful grass will end aggressive placements into feed lots, and it will end the highly elevated cow kill. The first will change the math on the on-feed inventory and the second will lower beef production dramatically. We are not actively adding to bullish positions. Watch and wait. The Chinese COVID lockdown is the wet blanket.
For a free 30-day trial to the evening livestock wire please send an email to: dennis.smith@archerfinancials.com
