Written Commentary
By Dennis Smith @denniscattle 1-312-242-7905
LEAN HOGS:
Packer margins narrowed dramatically yesterday with cash surging higher by more than $3.00 while the cutout edged lower, down $1.39. The cutout is not expected to decline much further. Hams, currently trading at 74 cents, are on their way to 80 cents and higher as the holiday demand and draw down of stocks takes place. The power in the hams should offset weakness in some of the retail items. Eventually the retail items will stabilize and then recover. The behavior of the packer is critical to observe. Their behavior tells me the hogs aren’t there. If numbers don’t rise in November cash and cutout stands to move sharply higher. Past November, numbers are expected to drop off. Futures had an impressive outside day higher close yesterday. A gap higher in the Dec would not be surprising. I remain bullish.
LIVE CATTLE:
Volume in LC futures yesterday was 57.3K with open interest rising by 1,350. Futures closed mixed but the deferred contracts finished strong and most active Dec settled nearly 100 points off the session low which also represents a new recent low. Possibly the cash steer market will stabilize this week after declining last week. Beef is being discounted to move. Select beef has not been this low since Oct 7th of 2019. My sources are indicating that wholesale beef should begin to edge higher starting next week. Futures are oversold. We’ve liquidated some Nov puts for hedges but we’re still holding our profitable hedges established in the April options. However, we’ve turned our spec traders to the long side of the Dec LC and the long side of the Oct 21 LC contract. Recommend to utilize the posted sell stop in the Dec as outlined in the evening livestock wire. Feeders look poised to bounce, to stage a meaningful recovery after a $16 decline.
The risk of loss in trading futures and options on futures can be substantial. The author does not guarantee the accuracy of the above information, although it is believed that the sources are reliable and the information accurate. The author assumes no liability or responsibility for direct or indirect, special, consequential or incidental damages or for any other damages relating or arising out of any action taken as a result of any information or advice contained in this commentary. The author disclaims any express or implied liability or responsibility for any action taken, which is solely at the liability and responsibility of the user. This report is a solicitation.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
