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Wednesday, October 12, 2022
GRAINS:
Grains are lower with crop ratings improving and traders are squaring up ahead of the supply/demand report scheduled for release later today. I’ve always felt that yield would come in better than expected. The market (corn) eventually convinced me otherwise, but I believe the finishing weather for soybeans was excellent. We have no position in corn while holding a bearish position in soybeans. No other trade rec. Dec wheat appears to be testing a trendline. A move below 890 here signals a move toward 850.
LEAN HOGS:
Open interest in hogs fell 2,266 cars on yesterday’s mixed performance. Most are concluding that Dec is holding too much of a discount to the index. The USDA will issue a new meat supply/demand table today. For tomorrow, weekly export sales and shipments will be important to see if China is still in the market. Also, sadly, the CPI report issued tomorrow morning will be important to watch. Pig prices continue to rise in China with the latest quote at 26.39, up .12. Pig prices in China are up 130% over the last 12 months. This has occurred in the face of COVID-19 lockdowns and a slowing economy. What does this tell you about pork production in China? In addition, they’ve been pulling pork out of the reserve to throttle the price advance, but to no avail. With the outside markets stable and with cash higher yesterday, I’m expecting a firm to higher open likely followed with a sharply higher close.
LIVE CATTLE:
There’s still no widespread cash steer trade to report. It appears about 2,000 head have traded in IA at 146, slightly lower than last week. Asking prices for the smaller show list reside at 145-146 in the south and 148 and $234 in the north. Choice beef gained $2 yesterday while the 50% trim continues to tank. The aggressive kills have flooded the pipeline with beef trimmings. This will change rather quickly when the kills begin to drop off. Open interest was down 695 cars on the impressive rally yesterday. It was interesting that OI in the Oct fell only 580 cars (10,600 outstanding). There were zero deliveries posted with the oldest long partly through March 15. Open interest in feeders dropped hard, down 2,019 as bearish traders got caught in a classic bear trap. This is managed money. If corn prices are not supported by the grain report today look for feeders to surge higher, again. I’m bullish live cattle futures and look for the board to lead the cash. The 40 and 50-day moving averages come in at 14950 basis the Dec LC. A close above this level will signal the start of a massive, long-term rally in cattle futures. Does it happen this week?
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