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Rumor That China is Easing Lockdown

GRAINS:

The grain board is higher as the trade comes to grips with several fundamental items. First, the war will not end soon, it’s becoming a war of attrition. Second, more than 70% of the corn crop will be planted past the optimal yield date. Third, the veg oil market is in a crack with no quick solutions available. Fourth, the USDA supply/demand should be friendly when issued tomorrow. Fifth, there’s no evidence, despite highly elevated prices, that demand for U.S. corn is slowing. Finally, there are unconfirmed rumors, from Elon Musk, that China is easing dramatically the COVID lockdowns in Shanghai. This would be an extremely important and bullish development if accurate. We’ve added to the bullish position this week by establishing the Aug corn 810/860 call spread paying 8 cents. It’s currently trading at 9 ½ cents. This adds no margin risk to the account.

LEAN HOGS:

Cash hog prices were quoted up $1.50 to up $2.25 yesterday with the average cash and the top end cash both reaching new highs for the year. Yet the cutout tumbled by $4.20 off weakness in hams and a sharply lower belly primal. Open interest on the mostly lower close yesterday was down 1,327. Note that the bull spreads showed some strength with Jun higher while the rest of the board was lower. The comment from Musk, if confirmed, would be bullish to very bullish. The Chinese COVID lockdown, now in its sixth week, has become a major bearish influence on hog futures. The bull spreads are smack on their lows including the July/Oct. Watch these closely for a bottom.

LIVE CATTLE:

Active trade in the south at 138-140 with KS moving numbers. Tops were reported in IA at 142. The beef was lower, but the volume of boxed trade was moderate to active. Open interest on the selloff yesterday dropped over 4,100 cars. Two more days for the silly Goldman Roll. RAIN IN THE PLAINS! This four-word development can change the course of the cattle market. Plentiful grass will end aggressive placements into feed lots, and it will end the highly elevated cow kill. The first will change the math on the on-feed inventory and the second will lower beef production dramatically. We are not actively adding to bullish positions. Watch and wait. The Chinese COVID lockdown is the wet blanket.

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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