By Dennis Smith

LIVE CATTLE

Total open interest in live cattle futures continues to decline. Total OI stands at the lowest level in over three years. Live cattle futures are in the process of attempting to change from a down trend into an uptrend. Many traders believe a seasonal low was established early last week. I contend that it will be very difficult for cattle futures to sustain a new trend (upward) as open interest declines. Steer and heifer slaughter is expected to be above last year for the next 30 to 40 days. The beef, recently soaring to record high territory, has effectively priced itself out of the consumer budget. Prices are edging back down and will likely continue to edge lower until prices attract re-newed demand. Other than option window hedges which we execute daily for clients in the December, February and April live cattle, I have no spec position in the market at this time. I still believe that feeder futures are overpriced versus the CME cash index.

LEAN HOGS

Good morning. Lean hog futures continue to experience what I believe to be the unwinding of large butterfly positions. Many traders have ridden the wave higher by holding long July and Oct versus short Aug positions.

As these are unwound, support has developed in the Aug with pressure in the July and Oct. Still, there's no obvious sign of a top yet in hog futures. Cash hog prices were narrowly mixed on Tuesday with more of the same expected for today. The product continues to work higher with the pork cutout value approaching all-time high territory. The USDA will issue their quarterly hog & pig report Friday afternoon at 2 p.m.. As the slaughter pace edges upward slightly from the low water mark of two weeks ago, as demand takes a breather (Fourth of July bookings are complete) we're in danger of experiencing a top in cash, cutout and futures. We're executing put spreads in the Aug hogs.

If you would like a free 30-day trial to my evening livestock wire please send me an email to Dennis.smith@archerfinancials.com or call me at 1.877.377.7905.

Please view my comments on the hog market via YouTube.

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services Inc.