Written Commentary
By Dennis Smith | 312-242-7905 | 708-519-0678
Follow me on Twitter @denniscattle
CORN AND SOYBEANS:
Corn is down a couple cents with March soybeans down 10 while soybean oil is down 59. Jan soybeans are experiencing the Goldman Roll this week whereas corn is not. Rains in S. America are beneficial but not drought breaking. Bottom line, it’s just not a normal weather pattern in South America. IMO odds favor that the uptrend in corn, soybeans and soybean oil will likely resume by the end of the week. A rash of important information will be released Thursday. I remain bullish. One suggestion, for the Mar corn positions rolled out of Dec, consider buying the Jan corn 415 puts to protect the position.
LEAN HOGS:
Please take note of the wire last night outlining both bearish possibilities and bullish possibilities. If I were a hog producer, I’d definitely own some of the Feb 52 puts at 50 points. A producer may not want to spend money on Jun calls but it’s a legitimate spec play. I favor the odds of the bullish play. However, there are 6 million wild pigs in the south. The odds of a scare in this country at some point are too high to ignore. Product is weak, fresh pork is widely available. A choppy trade but mostly lower trade is expected.
Producers: buy Feb LH 52 puts at 50 points.
LIVE CATTLE:
The Chinese continue to de-list Australian beef packers for imports into China. This will bring more Chinese imports to the U.S. beef industry. There are at least two beef plants converting their operation for export to China. In Oct beef exports to China were up 643% from last year. We are seeing the largest beef market in the world opening up for the U.S. beef producer with little to no fanfare. We’re working orders to buy Oct LC at 11310 which is our fourth unit long. We’re in favor of bull spreading the Feb/Apr and Feb/Jun. And we’re in favor of establishing a bullish three-way risk reversal in the Feb options. A major seasonal low is due by the end of next week. Clarity in our position and opinion is fairly rare in this industry. Most analysts waver and waddle in a no-opinion state of mind.
Recommend to use the range from 13400-13600 to unwind Jan feeder hedges.
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