Open Interest Higher in Hogs as Specs Enter Long Side

By Dennis Smith | Grain PhD Ag Risk Specialist


Cash is called lower but perhaps only slightly lower and not sharply lower. It appears the final index for the Aug LH contract will be near 5523. It also appears that both Oct and Dec are overvalued in terms of the current cash hog market. In addition, ensuing trade talks with China and on the NAFTA front are likely to encourage active bear spread activity. Most likely the Oct and Dec will be the whipping post. We’ve used the rally since last Friday to re-establish hedges after covering all hedges near the lows. Weekly pork export sales were good, 26,700 MT and up 5% from the 4-week average. Shipments were 19,500, or up 9%. Yesterday’s higher close occurred on light volume of only 33,300 contracts but open interest was higher in every hog contract. Total open interest was up 2,290. So apparently specs are coming into new length and hedgers are using the rally away from the highs to establish a hedge. My upside target on the long June position is 7580 and we suspect this will be reached today.


Weekly beef export sales were outstanding at 21,500 MT, up 76% from the 4-week average. Shipments, however, were down 9%. The USDA reported NE trade yesterday at 110-110.5 which is actually higher than trade from Tuesday (109). LC closed higher on light volume reported at 36,100 with open interest nearly unchanged. We are focused on unwinding the Aug/Oct bull spreads, taking profits. The tone in the wholesale beef is improving with loin cuts, the weak part of the beef carcass of late, actually showing some improvement. Consider LC a trading range environment with resistance above the Oct at 11000 and solid support in the Dec at 11200. Feeders should be able to rally in the short term.

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2018-08-16T13:32:31+00:00 August 16th, 2018|