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Tuesday, April 25, 2023
GRAINS:
Grains are lower across the board despite a wheat good to excellent rating at just 26%, which is the lowest rating since 1989. There is rain in the forecast. Corn and soy continue to sink with major support in Dec at 546 set to be challenged on a closing basis today. Reports indicated that 14% of the corn crop has been planted. By the end of April, most likely 25% of the corn will be in the ground. In addition, early May weather is going to open up nicely for rapid planting. The only question will be ND. Will they have time to plant before the insurance cutoff toward the end of May. My sources indicate yes. Many, if not most in the trade have lost sight of how elevated grain prices are. In fact, old crop corn and soy have never been this high going into the growing season. Ask any livestock producer and they’ll remind you of how elevated grain prices remain. We’ve been trading from the short side of corn since the middle of December.
- If Dec corn closes below 546 move buy stops down to breakeven.
- Liquidate a portion of the Jun corn 620 puts at 23 cents. (filled yesterday)
LEAN HOGS:
Open interest was up 1,343 yesterday so there’s no clear evidence of large, short covering, yet. A close above 8880 will likely trigger massive short covering, IMO. Remember that funds are holding a record short position approaching 25,000 contracts. While the carcass was lower yesterday, I suspect the carcass will be higher by the end of the week. It sounds like Tyson is able to move pigs to other plants as they access and make needed repairs after experiencing a fire at their plant in Madison, NE. They kill 8,200 head per day. The U.S. and Canadian pork industry is on the verge of a major contraction. Isoweans are expected to trade from $5 to as low as zero this week. Sow prices are 25 cents per pound. Butcher hog prices remain substantially below breakeven. The 640-report showed 722 loads sold for export last week. The is average volume but the load count included 273 loads of loins and 224 loads of butts and only 24 loads of variety meat. So, the value of the exports is substantially higher. Jun LH calls saw an increase in open interest of 1,293 yesterday. The Jun 90 calls, which we bought last week, jumped by 652. I have no specific outlook for today. Watch and wait for a close over 8880.
LIVE CATTLE:
Open interest was down 828 from the action yesterday. Futures opened in the soup but recovered into the closing bell. The session lows were established in the first 30 seconds of trade. Indeed, the on-feed report was not bearish. The show list is down 2k in TX, up 1k in KS and down 8k in NE. Margins have narrowed but they remain positive. The weekly kill is projected to come in near 621k or the same as last week. Last week beef production was down about 8% from last year. My sources continue to report strong demand for feeders at various auction barns across the country. The larger than expected placements in March simply reduce the available supply moving forward. Prices at OK City yesterday were fully steady. The feeder index stands at 202.24. Look for a fully steady to possibly higher cash steer market this week. We tried buying Oct futures yesterday and missed getting filled on the open by 20 points. So, instead, we bought a slug of the May FC 218 calls for 100 points. For today I have no new rec.
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