Friday October 18, 2024
GRAINS:
Dec corn staged an outside day higher close yesterday. Some pundits are calling it a key reversal which indicates they don’t know the definition of a key reversal. Open interest was higher in corn from yesterday’s action. Soybeans turned higher after grinding lower for 12 consecutive sessions. Yesterday’s action means NOTHING. It confirms that prices don’t go straight down. The fundamentals remain overwhelmingly bearish. I won’t be surprised to see soy trading lower shortly after the re-open today. My recommendation is to stay bearish. Longer term, on the next push lower in corn, I’m going to be ready to establish a price floor using Sep options for our livestock producers. Prices are just above 4-year lows and it’s dry, bone dry in the Corn Belt. Get ready.
LEAN HOGS:
Open interest in hogs jumped by 3,982. It was a doji pattern in Dec after pushing into new recent highs. This pattern is a little bit alarming, but I don’t see the same pattern in Feb and Apr. Perhaps it signals a pause, perhaps it signals nothing. The fundamental landscape is explosive. The hog carcass surged higher, quoted up $1.56 at $96.41. Pork rib cuts were quoted slightly lower. All other pork primal cuts were quoted higher. Folks, this is unheard of in the middle of Oct. Bellies led the surge, with loins and butts higher and hams slightly higher. Weekly pork export sales were pegged at 38,100 MT, up 1% from the 4-week average. Shipments were 34,000 MT, up 26%. The sow herd in China at the end of summer was down 4.8% from the previous year, at 40.36 million sows. The pig herd is down 3.5% at 427 million. Demand remains slack in China as the economy struggles.
I’m looking to take some profits on a test of 8000 basis the Dec hogs. This market is capable of a move to 8200, possibly all the way to 8400.
LIVE CATTLE:
The following trade was reported in the late USDA wire. TX 2200 head at 187.50, KS 4400 at 188, NE 1700 head at 188 and 6600 at $296. IA 6200 head at 187 and 1400 at $298. Overall, IMO, these prices are a bit disappointing. I’ll call TX up .50, KS up $1, NE up .50 live and unchanged in the dressed market with IA steady in the live but up $2 dressed. Both Oct and Dec turned lower yesterday but both also settled off the session lows. So, the jury is still out regarding a top. The beef was only slightly higher with choice up just .13 after being quoted up .69 at noon. Open interest in LC was nearly unchanged yesterday, up 225 cars. However, open interest in Dec puts jumped by 3,487. Interest in the 185 puts increased by 3,210 with open interest in the 175 strike up 1,908. Someone besides me is looking for a top. Weekly beef export sales were pegged at only 14,100 MT, down 9% from the 4-week average. Shipments were 15,300 MT, down 2%. We sold Dec LC yesterday for our spec traders. This is my first spec trade in LC in many weeks. We’ve been hedging production, establishing partial hedges for nearly two weeks.
Dressed steer weights jumped 9 pounds and beef production on this report (two weeks ago) was up 5% vs the same week last year. Packers have cut the kills severely and jacked up the wholesale beef market. The trouble is, however, retail beef prices are record high. Processing margins are now profitable. When they crank up the slaughter, I suspect the beef will crater. Packers, then, will start playing hardball and break the cash steer market. Hope I’m wrong but I doubt if I am.
For a free 30-day trial to the evening livestock wire please send a request to dennis.smith@archerfinancials.com
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