312-242-7905 Tuesday, March 14, 2023
GRAINS:
Corn futures are consolidating recent huge losses but there’s no indication of a bottom. A close in May below Friday’s low of 606 ¾ will send prices to my downward target which is 590 and again at 580. We’ll begin unwinding bearish positions at 590 and we’ll be completely out if May trades down to 580. IMO, corn futures are moving lower to uncover demand. Watch May meal closely as it approaches and challenges support at 473. Managed money is thought to be holding a huge, if not record long position. If/when the computers trigger sell signals, this market will move sharply lower in quick fashion. We’re long May 460 puts and we’re holding a host of bearish corn option positions.
LEAN HOGS:
The Goldman roll is over with total open interest in hog futures yesterday down 1,333. There was a substantial decline in both Apr calls and Apr puts yesterday as well. It was a sort of “give up” trade. Both bullish and bearish traders seem to be exiting hogs. Volume was large at 68.4k. The carcass was up $1.00 while cash was down $1.50 to $3.00. Like magic the margins improved nicely. For reference the CME lean hog index stands at 7962, up .23 for Mar 9. Apr futures are 660 over having settled at 86.22. The weekly hog slaughter is projected to come in at 2.490 million pigs or just 7k smaller than last week and 65k larger than last year. By the first week of Apr I’m expecting the weekly kills to be running below year ago levels. With weights also running below last year, the pork supply situation should drop off substantially. I’m bullish and recommend bullish option positions.
LIVE CATTLE:
The Goldman is complete in LC. Yesterday’s volume of trade was huge at 112.8k with open interest down 2,691 cars. Apr lost 8,279 while Jun increased 5,691. Someone unwound a large bearish position in Aug LC options yesterday. LC futures moved lower and closed lower yesterday due to the influence from the outside market forces. The fact that bond futures have recently staged their largest two-day rally since 1987 tells me the mess, the volatility from the outside markets is not over. We were stopped out of all Oct LC long futures positions yesterday for a small profit. The decision was made before the open to place sell stops in the deck to avoid a huge mess. Today we find out if this was a mistake. I recommend doing nothing today but watching the market. Packers will no doubt look to buy cattle lower this week. The beef is correcting downward. We still have a host of bullish option positions on the book in Oct LC and we still have bullish feeder positions in place in May options. Again, no rec for today other than watching and observing.
For a free 30-day trial to the evening livestock wire send an email to: dennis.smith@archerfinancials.com
