312-242-7905
Friday, October 21, 2022
GRAINS:
Brazil owns the soybean market. Scary stuff. Consider this:
- Brazil has increased soy acreage 40% over the last nine years.
- They’re expanding again this year despite high fert prices.
- Brazil is the low-cost soy producer in the world.
- Brazil has a shipping advantage over the U.S.
- Brazil has a geo-political advantage over the U.S.
- Brazil has a currency advantage over the U.S.
- Record large soy production has already been forecast.
I contend that U.S. soybean prices will not remain elevated under the weight of the huge advantage owned by Brazil. We tried selling Dec bean oil yesterday and just missed getting filled. Lower the entry price to 7040. The seasonal high is in place. Serious traders just need to be short by the close. Some decisions need to be made by the client. Hold the bearish corn position, waiting for a test of 660. The soybean strategy is penciled out below. I’m bearish.
- If the Nov soy settles above 1370 tomorrow, assume the short position from 1420 and place a buy stop in the deck at 1407 stop.
- Recommend selling Dec soybean oil at 7040, if filled, place a buy stop at 7215 stop. The current spec margin on bean oil is $3,300.
- Smart money is looking to sell Nov 23 soybeans.
LEAN HOGS:
Is the USDA broken? There’s still no closing pork report from yesterday and no closing cash hog market. So today we’re trading in the dark. Hog futures traded very light volume yesterday of 29k but open interest surged higher, rising by 2,433. Open interest was higher in nearly every contract. Really? Who is the buyer here and why? My guess is that funds are the major players and they have no idea why they’re buying. IMO, they’re about to get a whipping. I strongly recommend getting the Jun 90 puts covered today. We’re working GTC orders at 180 points. Get them filled. Hedgers need to consider protection. I’m bearish.
LIVE CATTLE:
OK, I have updates on the cash steer activity from yesterday. The following has been reported. TX 6700 head at 148, KS 9100 head at 148, up $3 from last week. NE 15100 head at 152 and at $236 dressed, up $3 to $5. IA 5800 head at 151 and at $236. The negotiated volume stands at 81.6k with an upward revision due this morning and, of course, another day to trade. IMPRESSIVE STUFF. This news should continue to support the board today ahead of the on-feed report. Open interest was up 131 so no big conclusions from this. Zero deliveries against the Oct LC with the oldest long now at 8/16. If you’re looking to add to the position, consider the three-way risk reversal penciled out below. I don’t look for this market to stop for a while.
- Consider the Apr LC 156/168c/152p paying 165 points. The 156 call is 160 points in the money. Risk this new position to a close below 15400.
For a free 30-day trial to the evening livestock wire that also includes the morning livestock report and midday pork and beef update, send an email to dennis.smith@archerfinancials.com
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