Even with support from the much lower US dollar we saw December, February, and April lean Hog futures start off strong on Monday, but close near the low end of the trading range. Weather could be a short-term supportive factor. Snows in eastern Nebraska, southern Minnesota, Iowa, and northern Illinois Monday and Tuesday could delay marketing's for a short period of time.
Last Friday showed big volume at 46,946 contracts on the strong rebound from early morning lows. That could have provided a solid stamp on the idea last week's price decline will not carry over into this week. Allendale is neutral to nearby December and February and supportive to April through June contracts. We still advise to have no lean hog futures hedges on for producers. For speculators we are short a February put.
Having said the good news noted above, we have to point out February and April filled the gap that was immediately overhead. AFTER filling it the market closed back below the gap...a negative sign. While we may be supportive here, we have to recognize the market is not ready to join our bullish parade.
Technically in the Lean Hogs, the short-term trend on the February contract is higher. Our next projected major turn day for Lean Hogs is December 30.
Again we saw the stock market post stronger trade on Monday. The Dow index closed at the highest point since November 7. Contrary to the bad new we received on Friday regarding November employment figures the trade is looking ahead to a Big 4 bailout and President elect Obama's infrastructure rebuilding announcements. If the stock market is suggesting we are near the worst of it and is holding its ground, shouldn't Live Cattle futures be doing the same? Instead, futures are suggesting the worst of it is yet to come.
Last week's average live-based Cash Cattle price was $86.46. Wholesale beef on Monday ended mixed to slightly lower. Packers dropped the kill a little last week and are rumored to be ready to drop this week's kill also. Monday's kill however, at 127,000 head, was stronger than the 116,000 head kill expected.
For hedgers we will hold those February puts. We still feel these deferred futures are grossly undervalued but so far will still not take off those puts for hedgers.
In the Live Cattle futures market, technically the long-term trend is down. New contract lows were posted on Friday. Allendale's Vital Technical Indicator has the next projected major turn day for Live Cattle as December 30.
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