Hogs – Is the Uptrend Over?

LEAN HOGS:

Hogs set back hard on Friday with June touching limit down but not settling limit down. So, we’re on normal trading limits today of 375 points. Major support resides just underneath the market at 10170. I’m eyeballing the Jun 110 calls and the 112 calls. They settled at 140 and 102 respectively.  June hogs fell 800 points in three sessions. I consider the uptrend still intact. We’ll get the final index for the expired Apr hogs later today. Open interest was down hard, down 4,888. Jun calls increased by 1,078 but Jun puts were also higher, increasing by 1,951 in open interest. It appeared that hedgers may have been buying 95 puts and selling 111 calls. I want to watch the action today. I consider the uptrend still intact despite the late week aggressive selling. For today, no new rec.

LIVE CATTLE:

There are four key items that I’m focused on early this week. First, the cash steer market is edging lower but not sharply lower. The break in the cash has not been enough to restore lousy packer processing margins. This confirms that leverage is not completely in packer hands. Second, cash feeder prices at auction barns have not fallen sharply. The latest feeder index stands at 244.57, up .93. Apr FC futures are 700 under, May is 1040 under and Aug FC are just 100 over the index. Cash is king and the cash steer and cash feeder markets have not sold off nearly as much as the board has. Third, choice beef was up $3.40 last week. Temperatures are improving and seasonal demand is underway. And fourth, I’m hearing that March placements will be down 10% to 12% on the upcoming on-feed report scheduled for Friday. The talk is that placements were off as much as 20% in the south. Grass and pasture conditions are vastly improved. The cow slaughter is down dramatically this year. Beef is going to get very tight and placements are going to drop off for several months. By the fourth quarter, the on-feed inventory will be completely different. We stepped into some bullish Dec LC three-way risk reversals on the open Friday. We’re working buy stop orders to add to our length well above the market. I suspect futures close higher today. No new rec.

• Establish the Dec LC 178/192c/174p three-way risk reversal. Filled at even Friday.
• Consider working orders buying Dec LC at 18190 stop.

GRAINS:

Iran launched 300 missiles at Israel Saturday and all but a few were shot down. Most were shot down before entering Israeli air space. The lack of damage sustained kept the grain market and crude oil market subdued overnight. Corn basis has weakened as many fear Chinese cancelations. Wheat is weak, again and soybeans can’t hold a rally ahead of spring planting. It appears that IA, the driest parts of IA will get a major drink this week. I’m short-term bullish corn but long term bearish. No rec.

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