Sept. 9, 2013 - Lead Hog OI Stands Record Large at Over 321,000 Cars

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By Dennis Smith

LEAN HOGS

Hogs posted fresh contract highs for the third consecutive session on Friday with OI rising by 3,200 cars. Total lean hog OI is record large at over 320,000 cars. The volume of trade in lean hog futures has been very large the last two sessions, on either side of 70,000 cars. For comparison, Friday's volume of trade in live cattle was 54,000. The funds are fully loaded with speculative length in the hogs, likely holding a record large fund long position in excess of 80,000 cars. For comparison, the funds were long about 3,000 cars this time last year. Fundamentally, the bullish trade believes there's a shortfall of hogs with last week's kill lighter than expected. The talk is the shortfall will continue this week. Perhaps, but it would extremely rare for tight hog numbers to persist in Sep. The Goldman Roll starts today and will continue all week. Will the market top out or will Oct hogs continue to move upward? In my opinion we'll likely top out. Time will tell.

LIVE CATTLE

Japan reported better than expected GDP growth in the second quarter and Chinese exports, as reported overnight, were strong. This is good news for beef exports which is going to be a key driving force in cattle prices moving forward. The cash steer market traded steady on Friday in the S. Plains at $1.23. Prices in the north continued to leak with NE hot beef trading at $194, mostly down $2 from the previous week. The steady cash in the S. Plains is the fourth consecutive week of steady money. All indications are that fed cattle supplies will continue to tighten. I'm hearing that Aug placements into the feed yards were down about 10%. As the case with the hogs, the Goldman Roll begins today in the live cattle. Look for live cattle and feeder cattle futures to likely develop support during the course of the trading week.

If you would like a free 30-day trial to my evening livestock wire please send me an email. info@admis.com

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 market. 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.

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