Written Commentary
CATTLE
While technically overbought and still operating under the negative influence of Monday’s key reversal, the cattle market seemed to hold shallow support on the selloff yesterday. April cattle closed slightly lower on the session but up sharply from the early lows. The market experienced significant selling pressure early in the day on follow-through technical selling from the key reversal. Ideas that the premium to the cash market is a bit too wide helped pressure the market early in the day. In addition, traders remain concerned over too much dry weather in the central and southern plains which could eventually force an increase in cow and non-fed cattle slaughter into the spring which is bullish for later this year but bearish for the spring.
HOGS
The hog market remains in a strong uptrend with surging open interest but has reached an extreme overbought condition, and also is trading at an extreme premium to the cash market. Packer profit margins are strong due to recent strength in pork values, and packers are having to bid up the cash market to fill needs. Packers have the incentive to push as many hogs as possible through the pipeline. April hogs have hit contract highs in five of the last six trading sessions and the market posted a new contract high at 104.67 yesterday. Continued talk that packers are in need of live inventory and strong pork values have helped to support the rally. The CME Lean Hog Index as of February 4 was 85.87 up from 84.30 the previous session and 82.15 the previous week. The USDA pork cutout, released after the close yesterday, came in at $95.64, down 25 cents from Monday but up from $91.66 the previous week.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
