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Tuesday April 18, 2017
Cash hog prices, yesterday, were mostly unchanged on very light receipts. Hog slaughter was only 300,000 with several plants dark on Easter Monday. The question is; will the downturn in production result in a nice jump in the value of the pork carcass by the end of the week? We suspect that yes, it will. The closing pork report showed the cutout edging higher by .38 yesterday, bringing the value of the cutout back toward $75.00. This week’s kill is projected to be 2.269 million, up slightly from last week but up only 1.6% from last year. Packer margins remain highly profitable. As numbers decline, eventually, look for cash to bottom. The July and Aug hog contracts have a nice looking (possibly) head and shoulders bottom formation. June hogs need to post a close over 7450 to give this contract the look and feel of a bottom.
It was a light volume rally in the LC futures yesterday (only 38,430) but open interest surge upward to another record high. Total LC open interest increased by 5,221 to 404,366. We’ve never seen LC open interest above 400,000 cars. What happen to the theory put forth by many that live cattle futures were “broken”? Broken markets don’t have record high open interest. Yesterday’s kill was only 108,000 and cutout value continued to surge upward with the choice up $2.05 at $214.13. Movement was slow, however, at 50 boxes and 41 trim. There were no cash bids to report yesterday. The FCE has 4,446 cattle registered for sale this week of which 84% reside in NE. Technically there’s no indication of a top.
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