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July 7 Morning Livestock Report


Consider it highly likely that a top may have been established yesterday. The weather pattern does not look threatening with chances of rain this week and later during the month. The crop, both corn and soybeans remain rated above 70% good to excellent. We’ve been sellers and/or buyers of put options.



Cash is expected to continue eroding. The weekly kill is projected to be large, historically large for mid-summer at 2.583 million pigs which would be up nearly 7% from last year. There continues to be problems in the food chain. Restrictions remain in place at some retail outlets and processing items, which is a major part of pork sales, remain tight in many parts of the country. Retail prices remain high. Yet we’re processing record large numbers and pushing this product into the broken pipeline. Buying Aug puts is highly recommended for hedge clients. Specifically, the Aug 48 puts settled at 205 points and a guy can establish the 46/40 put spread for 100 points. If prices bottom then you’ve left the upside open. If we experience a weak expiration in the July followed by a weak expiration in the Aug, you at least have some protection. There’s a chance that euthanized baby pigs will sponsor a rally in the fall time frame.

  • Buy Aug LH 48 puts at 200 points. 
  • Establish the Aug 46/40 put spread at 90 to 100 points.



Open interest was down in LC futures for the second consecutive day that the market rallied higher. Specifically, the OI in the Aug dropped by over 5500 contracts with total OI down about 1700 cars. Note that the close yesterday was well off the session highs in the most active Aug LC. Cash steer prices appear to be stabilizing but we consider it unlikely for them to simply turn higher at this time of year. Beef demand will not be good over the next 30 to 40 days. We also believe there’s lots of over finished cattle in the feedlots. Beef is expected to grind lower during July and likely be forced to below $200. We’re holding hedges in the Aug LC and in the Aug and Oct FC. I’d look for a lower market today.

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.

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