Wholesale pork closed higher Monday. We have to keep in mind it is not out of reason for cash hog and pork prices to stabilize or maybe even rally temporarily going from mid September into October. The reason is National Pork Month, which occurs in October. Procurement for those features is going on right now. The other issue we will note is it is not until October that slaughter levels, which are record for this time of year at 2.3 million head, make another big step up. With futures already hitting our downside objective on Friday, a month or two ahead of expectations, we will not rush to jump out of hedges yet.
Lean Hog Technical Commentary: The trend is down.
Vital Technical Indicator: Next projected major turn day for lean hogs is September 22.
Trade Idea(s): Bear Spread - Bought the Feb/Sold the Oct at 650. Settled at
617.
Option Strategy(s): Sold 1 December $72 call at $2.20. Settled at $1.70.
It was impressive to see cattle futures not only hold their ground in front of terrible economic news Monday morning, but to actually post a strong gain. It would seem after weeks of outsiders suggesting bad economic news would hurt beef (the premium protein) demand and it has not actually being seen, the trade may be ready to turn its attention to the falling supply story we have been noting. We are not saying this market has bottomed and will rally straight up. We are saying these October and December contracts are undervalued. We see true value at $106 for October and $108 for December. We will probe for a bottom here by selling a put as shown below.
Live Cattle Technical Commentary: The trend is down. Another higher close is needed to post a breakout.
Vital Technical Indicator: Next projected major turn day is the 18th for live cattle.
Trade Idea(s): Stand aside.
Option Strategy(s): Sell 1 Dec $104 put for $2.00, risk $1.00, objective 0.
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