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Look For Higher Cash Steer Prices


Open interest in LC edged higher, rising by 1,183 cars. This is bullish given fresh contract highs in all contracts but the Feb and Apr. I’m convinced that packers will pay higher money this week and likely again next week to secure animals. The math regarding cattle inventory is bullish. Oct saw record small placements and Nov saw record high marketings. Most robust of all is the fact that packer margins are once again highly profitable. Choice beef was up $9.12 last week and so far this week the choice has gained $7.46. Balls to the wall with the slaughter. Dec LC closed 60 higher, new contract high, new life of contract high settlement and the highest close for a spot cattle contract since April of 2015. Look for a mixed opening followed at some point this morning by a surge of buying. My upside liquidation target resides only 330 points higher than yesterday’s settlement. Beware that I’m not adding up here, I’m preparing to ring the bell.

  • The liquidation target zone is when Feb LC trade to 16110.
  • Recommend working orders liquidating the Feb LC 157 calls at 310 points.

Herd of cows


Last week the hog carcass gained $4.62. So far this week the carcass has lost $3.49. So, in the wake of a huge disruption in the kill last week, backing up 600,000 pigs, the cutout has gained a whopping $1.13. Feb futures settled at 9080 yesterday compared to the hog index of 8069. At this time of year (holidays) just about anything is possible in these markets. IMO, it’s highly possible that Feb gaps lower today and never recovers. My opinion is well documented, bearish in the short term and bullish longer term. We will approach a meat shortage, a global meat shortage over the next few years. We’ve recommended that producers sell the board and we’ve recommended very conservative option plays for our spec traders. Look for sharply lower cash bids into next week. The weekly export sales report won’t be released until tomorrow. Normal trading hours both today and tomorrow and then all markets are closed Monday. Finally, open interest in LH was up 1,666 yesterday with Feb OI increasing by 1,042.


The grain board is lower with wheat the loss leader, currently down 14 cents with corn down 3 and soy down 2 cents. Funds remain a big-short in wheat and after the 60 cent move off the lows, odds favor a re-test of the lows. Corn has staged an impressive move upward which was not expected by me. I consider the long-term fundamentals bearish and fear that elevated corn prices are about to drop down hard and search out a new, lower trading range ahead of the 2023 growing season. Large crops in South America, poor to very poor export demand, declining fertilizer prices and expectations for increased corn acreage next spring and what appears to be a changing weather pattern in the U.S. are my reasons for being bearish. I recommend holding all bearish positions at least until after the Jan crop report and then we’ll re-evaluate.

For a free 30-day trial to the evening livestock wire send an email to: dennis.smith@archerfinancials.com and be sure to follow @denniscattle on Twitter.

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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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