Quiet action for Lean Hogs as USDA's slaughter estimate for today at 437,000 head may be a bit too large. Private analysts look for Monday's number to be brought down to 429,000 head, due to the extremely cold temps in the upper Midwest. We expect a revision lower Tuesday. While supply may be constrained for a short period, the wholesale level just does not care. Wholesale pork dropped 76 cents on Monday. Longer-term issues such as good October pork exports and liquidation hitting first quarter of next year keep us supportive. We believe USDA is flat out overestimating 2009 pork production and are bullish.
Lean Hog Technical Commentary: The gap up to 6305 on the February is enticing. The next projected major turn day for Lean Hogs is December 30.
Trade Idea(s): Bought 1 Feb at 6225, risk 6120, objective 6375. Closed 6257.
Option Strategy(s): Sold 1 Feb 63 put 235, risk to 3.20, objective 0. Closed 267.
Live Cattle have not made new lows for over a week. You may laugh at that statement but we have to wonder if the trade is trying to factor in all the bearish economy related news. In recent days, US beef plants have been banned from exporting to Russia, South Korea, and Japan. Last week cash cattle averaged a $2 to $3 drop. Given that bad news, futures are holding steady. This week we will be reminded of how tight feedlot supplies are with Friday's Cattle on Feed report. It may show placements last month down around 5% or so...yet again. We strongly feel these futures such as (February, June, and August) have discounted prices more than needed. We do not have confirmation a bottom is in place but are looking for solid technical signs of that possibility.
Cattle Technical Commentary: Monday's close was just above the downtrend resistance. Charts will turn bullish on another push higher for a possible bottom. Allendale's next projected major turn day is December 30.
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