Perhaps a Massive Change of Ownership in Lean Hogs

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Thursday January 17, 2019

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Cash is called mostly steady for today. Note that cash came in higher and not lower yesterday. Feb and Apr futures were pounded lower yesterday off talk of lower trending cash and off widespread talk of a flood of pork in China and off talk that the trade war with China would not be solved anytime soon. For reference the latest CME lean hog index stands at 5802 with Feb futures settling yesterday at 6005. IMO anything approaching 5900 in the Feb will attract large buying. Yesterdays volume in Feb was 22,100 with total open interest in the Feb at 36,250. So the volume represented 60% of the total open interest. The net change in OI in the Feb was down 56. So a massive change in ownership likely occurred yesterday with funds and small spec selling while commercial interests were likely buyers. Total hog volume of trade was 60,700 with total open interest up 850. The situation in China remains long term bullish.


LC volume of trade yesterday was reported at 90,000 with open interest rising by 750. The bull spreads continued to crank upward in the face of another round of winter weather, poor to very poor feed lot conditions and with the knowledge that packers need to buy large numbers of cattle this week after seeing the negotiated volume last week of only 79,000. At some point, likely as soon as Friday, packers are going to have to bite the bullet and pay feed lot owners their asking price. Im hearing that asking prices are edging higher from $1.27 closer to $1.30. One item that is somewhat alarming is the fact that feeders are not participating in this rally. This tends to signal that were looking at short term strength but not a long term bullish move. Upside follow through in the June, Aug and Oct contracts represent hedging opportunities.

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