By Dennis Smith
There were 50 deliveries posted against the Aug live cattle contract on FND. The deliveries appear to be scattered among the street with no strong stopper evident. The oldest long is partly thru April 4. The August contract did not set back on the delivery news, evidently fully anticipated by the trade. The show list for this week is slightly larger than last week. There is no cash trade to report on the back side of steady cash trading last week. It would appear that the summer cash bottom is in place at $1.19. This bottom, by the way, is several cents higher than most expected. While the wholesale beef continues to struggle, the current weather pattern is conducive to excellent meat clearance. I have a feeling, a hunch, that live cattle will experience one of those phantom buy orders that we've experienced several times before. These orders tend to clear the deck of all offers, driving futures sharply higher like a bull in a china shop. I'm bullish feeders and we've already established bullish option positions in this market. My next play, from a spec, will be executing bullish positions in the live cattle futures and options market. Stay tuned.
Wow! Lean hog futures soared higher yesterday with the Oct actually leading all advances. The strength in the October and December caught many in the trade by surprise and forced some unwinding of bull spreads and butter fly spreads. The August hogs penetrated several layers of resistance, posted a fresh contract high and posted a new high close. Clearly, the door is now open for additional gains in the Aug with expiration one week from Wednesday. It would appear this contract may be headed toward the 10200-10250 level into expiration. Cash hog prices were powerful strong yesterday with prices in the west up $2.50. The pork cutout continues to advance as well. This week's kill will fall short of the year ago level. It would appear that butcher hog supplies are tight and demand for fresh pork continues to outstrip production. This situation could continue for two to four more weeks. We've harvested part of our August 100 calls which we paid from 15 to 25 points to own. We sold a few last Friday at 45 and liquidated some yesterday as high as 90 points. I plan on taking the remainder into expiration unless the August jumps to 10200, then we'll likely liquidate. I'm eye-balling the Oct for a spec short position.
If you would like a free 30-day trial to my evening livestock wire please send me an email to Dennis.firstname.lastname@example.org or call me at (877) 377-7905.
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