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Tuesday, March 29, 2022
GRAINS:
Melt down. Wheat is down over 80 cents. Corn was down only a few cents in the early action this morning but is currently down 25 cents. Soybeans, after losing 46 cents yesterday, are down another 16 cents today. May bean oil is down 100. We liquidated our May corn $8.00 calls yesterday, taking a 16-cent loss. We’re holding our bean oil and holding our bullish option positions in the Dec corn for our livestock producers. At some point we’ll come in and add to this position. Is peace at hand? Who knows? My concern is that U.S. producers will plant fewer corn acres this spring and regardless of the war headlines, the black sea will remain closed for weeks.
LEAN HOGS:
Open interest in hogs was up 1,656 yesterday with the first three contracts closing higher. The carcass continues to sputter which is annoying. IMO, fairly soon, the cutout will jump over $20 in a single week. We’re approaching a global pork shortage. The U.S. has liquidated a large number of sows. The latest estimates out of the EU indicated they’ve liquidated 400,000 sows as of Jan 1 with contraction still occurring. The Chinese, we are sure, are liquidating not only sows but liquidating any butcher hog that is alive. Prices have already started upward in the U.S. and in the EU. Prices are still sinking in China. Exports are ripping to Mexico as well as most of our other export customers. The lone exception, of course, is China. Hog futures continue to anticipate the events discussed above. Apr futures are now premium to the index again with the summer hogs building a substantial premium not only to the index but to the carcass. My liquidation target in Apr pigs is 10940. Rink the register if futures move to this level, both futures and a slug of options. My liquidation target in Jun is 12810. Liquidate all long futures here.
LIVE CATTLE:
I’m already hearing that the weekly kill will expand from the 650k early projection to closer to 660k. Why not? Margins are highly profitable. There was no cash steer trade reported yesterday. My sources are expecting cash to trade at $1.40 or higher in the south this week. The show list is smaller, sharply lower in the north. Watch April futures for a clue regarding the cash market. Holding above 140 today would be friendly. Beef demand, springtime domestic beef demand is about to hit the market. Frankly, with unemployment at a 50-year low and with COVID fading fast, seasonal demand should be powerfully strong. Export demand should also remain in high gear. The new removal of the safeguard for U.S. beef to Japan is very friendly. We bought Jun LC yesterday with a posted sell stop.
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