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Key Reversal Noted in Lean Hogs Yesterday on High Volume

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Thursday January 11, 2018

You can watch my Two Minute Drill on the how Nothern Storms are effecting the beef market here:


Cash was strong yesterday and called higher again today. Impressive. Packers keep chasing and keep bidding their margin away. While still profitable, pork processing margins have taken a major hit in early 2018. Futures displayed possible topping action yesterday. Technically it was a key reversal in the Feb and a bearish engulfing pattern in all contracts. In addition, it occurred on huge volume of trade at over 84,000 contracts which is the largest volume going back for months. Open interest was up just slightly, up 710 cars. Were watching and waiting for a break so we can entertain the idea of establishing bullish positions. Were long a host of Feb puts.


Live cattle posted new low settlements for the current move in nearly every contract yesterday. Technically this is a bearish indication. Volume was active at 95,000 and this represents the third consecutive high volume session. Feb LC have gapped lower twice in the last week and neither gap has been filled. The market is poised for another gap lower today. Cash trade occurred again on Wednesday at 119-120 and at 192-193 in the beef. The choice beef turned lower as it appears the seasonal demand push is now completed. Consider this bearish news. Production is not going to let up. In fact, were looking a hugerecord large production coming down the pipe with second quarter production projected to jump more than 8% versus last year. And why not, on-feed inventory stands at 108% of last year and weights are starting to move above last year. Id look for additional downside follow through today.

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The risk of loss in trading futures and options on futures can be substantial. The author does not guarantee the accuracy of the above information, although it is believed that the sources are reliable and the information accurate. The author assumes no liability or responsibility for direct or indirect, special, consequential or incidental damages or for any other damages relating or arising out of any action taken as a result of any information or advice contained in this commentary. The author disclaims any express or implied liability or responsibility for any action taken, which is solely at the liability and responsibility of the user. In addition, the author of this piece currently trades for his own account and may have financial interest in the following derivative products: (corn, soybeans, soybean meal, soybean oil, lean hogs, live cattle, feeder cattle).

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About the author

Dennis Smith has been a full service commodity broker specializing in grain and livestock trading for over 25 years. Dennis has a wide range of customers, many of whom are grain and livestock producers. Dennis develops and helps execute hedging and speculative strategies in his Daily Livestock Wire which is prepared each afternoon exclusively for his customers.

Dennis grew up in Central Illinois before launching his brokerage career.

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