Written Commentary
CATTLE
With the outside market forces turning very negative this morning, and with increased concerns that Covid restrictions could slow short-term restaurant demand, the market may setback in the recent consolidation range today. However, the supply fundamentals seem to be improving recently and this looks to continue over the next several months, and beef prices remain at record highs for this time of the year indicating very strong demand. For the USDA Cattle-On-Feed report, traders see July placements down 7.1% with a range of -9.3% to -4.5%. Marketing’s for the month of July are expected to be down 3.6%, with a range of -4.8% to -2.5%. As a result, traders see August 1 cattle on feed supply at down 1.8% with a range of -2.3% to – 1.2%.
LEAN HOGS
While the cash market continues to inch lower, futures have priced in an enormous break and this has left the market in a deeply oversold condition. Cash fundamental news remains sloppy but the extreme discount of futures to cash is limiting the selling from speculators. The CME Lean Hog Index as of August 16th was 109.64 down from 109.67 the previous session and down from 110.77 the previous week. This leaves October hogs trading at a $20.62 discount to the cash market as compared with the 5-year average discount of $6.62. In other words, if the market was trading a normal basis, October hogs would be trading at 103.02.
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.
