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Home / Futures Blog / The Swine Times- 12/11-12/15

The Swine Times- 12/11-12/15

December 11, 2017 by John Payne

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Good morning hog traders

Current positions:

  • Short 1 unit of Feb hogs

Last week we took profit on our Long Dec-Short Feb position.

Below is how the weekly product market changed for the week ending 12/8/2017.

Looking into next week:

  • The dominant news to report this week is that the product values have more than likely peaked and will be on the defensive for at least the next couple of weeks.
  • Here is how we see the primal cuts performing the next couple of weeks.
  • Loins and butts should trade plus or minus $3 -$5 either side of Friday’s close for the balance of the year.
  • Ribs will not be much of a factor until after the first of the year.
  • Bone-in Picnics, given the price level at which they are, will not move up or down to any significant degree.
  • Swine Times believes that the bellies and hams will be the two cuts that will be impacting the pork cutout the most.  We are of the opinion that the hams could lose as much as $10 cwt between now and January first.  This could put them at $57-$58 by the end of the year. The bellies will also be under a considerable amount of pressure and could lose as much as $20-$25 the next couple of weeks.  They closed out Friday at 142.52.
  • As negative as these price projections are, it could be worse, particularly if the packer adds to their weekly slaughter schedules.  If that happens, the potential is there for ALL of the primal cuts to go even lower.  Pay attention to the USDA daily slaughters and be alert to any increases to the Saturday slaughter schedules .
  • The USDA Interior Iowa Weight went up 1.1 lbs. at 286.9 versus 285.8 the week prior and 281.2 for the same week last year.  Swine Times is raising the yellow caution flag on these weights. It appears that the weights have begun to increase at a time of year that would lead us to believe that there may be some hogs backed up.  We say this because the weights this year are now 5.7 lbs. over last year.  This is a concern with respect to the possibility these increases could be indicative of a backup of market ready hogs. We will continue to monitor these and relay any news as it becomes available.

How we trade this:

  • The futures will trade to a large degree by what the product values do and will be influenced more by the drop in ham prices and, maybe even to a greater extent, the drop in belly prices.
  • We look for the December hogs to trade within 50 cents of the cash market and expire within that range on December 14 when they go off the board at noon.
  • February hogs should drop below $68 and possibly go down to $67.  In our opinion, this will depend on how backed up the hog supply is and how much of a loss the cutout sustains between now and January first.
  • If you took our recommendation and sold February hogs, you may want to take some profit if the February contract goes under $67.00
  • We will be looking to get long February hogs under $67 and April hogs under $70.00 if they get there. Be patient on buying these, as there is a lot of time left.
  • Once the industry gets the holidays behind them and some of the backlog of hogs gets cleaned up, we believe the February hogs could be good property from the long side.
  • Export sales will not be much of a factor for the next couple of weeks, but pay attention to news of sales out front to China and Southeast Asia.
  • Watch the weather and adjust your positions accordingly.

*USDA   National Hog and Pork summary
** Expressed in thousand head
 

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Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

Filed Under: The Swine Times

About John Payne

John Payne is a Senior Futures & Options Broker and Market Strategist with Daniels Trading. He is the publisher of the grain focused newsletter called This Week in Grain, along with being a co-editor of Andy Daniels’s newsletter, Grain Analyst. He has been working as a series 3 registered broker since 2008.

John graduated from the University of Iowa with a degree in economics. After school, John embarked on a 4 year career with the United States Navy. It was during two tours in Iraq and the Persian Gulf where John realized how important commodities are to the survival of society as we know it. It was this understanding that brought about John’s curiosity in commodities. Upon his honorable discharge in 2007, John’s intense interest in the world of commodities inspired him to move to Chicago and pursue his passion in a career in the futures arena.

After a three year position with a managed futures firm specialized in livestock trading, he was given the opportunity to join the team at Daniels Trading. Being in the business and seeing how other IB’s operated, it was the integrity and straightforward approach of the Daniels management team and brokers that attracted him to make the move. Since joining Daniels, John has broadened his fundamental and technical analysis of the markets even further. John has been writing his newsletter This Week in Grain under the Daniels banner since 2011.

Working in high pressure industries like the military and capital markets, John has learned the value of preparation in times of stress. He believes that instilling within his clients the value of a good plan and a cool head for dealing with the day to day swings of commodity markets. He treats every client as a teammate, understanding that his job is to help clients achieve their goals, whatever they may be.

John is a proud supporter of the Iraq and Afghanistan Veterans of America, the Veterans of Foreign Wars and the National Corn Growers Association. When he is not working, he enjoys athletics of all kinds and spending time with his wife and their two kids.

John’s commentary is featured in the following publications:

* All Ag Radio – Sirius Channel 80
* AM 880 KRVN – Lexington, Nebraska
* RFD TV
* Wall Street Journal
* Barron’s
* China News Daily (English version)

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Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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