Fundamental Support: Wheat finished sharply lower today as we saw rain move through the Western Plains over the weekend and though the coverage was patchy it was enough to see some longs liquidate their positions. Export inspections were within trade expectations. A major player in the commodities markets, Barclays, has decided to liquidate their commodity trading arms which could pull money out of the market and could have been the cause of some liquidation. The situation in the Ukraine doesn’t appear to be getting any better but the lack of trade in parts of Europe due to the Easter Monday holiday could have subdued rumors and speculation about the Ukraine and Russian standoff. We would expect wheat to touch the recent lows and if we close into new lows we could see additional liquidation. We need to keep a close on long term forecast to see if any additional rain will alleviate the dryness in the western plains and continue to watch for any escalation in between Ukraine and Russia.
- Export inspections trade expecting between 500-700,000 tonnes and 683,544 was reported
- Wheat ratings are expected to decrease 1% to 33% GTE
- Egypt signs deal to buy 4.25 million tonnes of locally grown wheat a 25% increase from last year
- (4/17) Buy July Chicago wheat(CBOT:WN14) 663 1/2, Risk 643 1/2, Objective 704.
Lean Hog(CME:LHM14) Fundamental Support: Part of today’s sharp drop in futures may have been attributed to the news on Friday that USDA will now be requiring reporting of PED cases. Perhaps USDA’s involvement with this issue, and the $5 million research investment, will lead the market to believe the days of PED’s influence will be ending. With 10 pork plants down in observance of Easter the day’s kill fell to 273,000 head. That was even less than the three analysts who submit estimates. Their average guess was 282,000. This news helped trump the higher prices reported for cash hogs today. While the “right now” situation is still a little negative for cash hogs it won’t be long before we are back involved with full kill weeks and a larger packer appetite. Additionally, we could throw on warm weather buying and concerns about the May PED slaughter issue looming. We still estimate $130 for summer futures.
- (1/3) Sold 2 June 96.00 puts 1.95, risk to 1.97, objective 0. Closed 0.02.
- (1/24) Sold 1 June 98.00 put 2.02, risk to 2.10, objective 0. Closed 0.02.
- (4/21) Sold 2 June 120.00 puts 2.20, risk 1.05 from entry, objective 0. Closed 1.92.
Live Cattle (CME:LCM14)
Fundamental Support: On the positive end we have seen cash beef prices pick up over the last week. That continued again today as well. End users are stepping up their procurement now that we have a little warmer weather kicking in. The other supportive issue directly ahead is our expectation for tomorrow’s monthly Cold Storage report. We see beef stocks falling by 9 million lbs from the previous month when normally there is a 2 million increase. March held small beef production levels and a stocks drawdown helped cushion the supply deficit. This time of year is a little tricky to trade at times though. This is a demand pull for beef. On the other hand we have a supply increase for live cattle. This afternoon’s showlist reported a 13,000 head increase over last week (more in the North and less in the South). A demand pull at the same time as a supply push means we may see cash trade steady this week. We do remain clearly bearish these markets but don’t expect futures to get hit hard until mid-May.
- (03/21) Bought December/sold August 5.30, risk to 3.00, objective 9.20. Closed 6.75.
- (03/31) Bought December/sold August 5.77, risk to 3.00, objective 9.20. Closed 6.75.
- (04/08) Sold August 133.20, risk 134.75, objective 126.00. Closed 132.92.
- (04/21) Sold August 132.72, risk 136.45, objective 128.02. Closed 132.92.