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April 6th, 2018 Newsletter

Take a look at the weekly hogs chart and outlook and educate yourself on the differences between trading stocks and ETFs versus trading futures and commodities.

April 6th, 2018 - Issue #916

In This Issue

1. Trading Futures vs. ETFs, Stocks
2. Hot Market Report: Lean Hogs
3. Economic Calendar

1. (Day) Trading Futures vs. ETFs, Stocks

By: John D Thorpe, Cannon Trading Senior Commodities Broker

According to the Wall Street Journal, assets in Exchange Traded Funds (ETFs) have grown to roughly $2 trillion dollars since their inception. Exchange Traded Funds were created to compete with the $20 trillion dollar Mutual Fund Market as it was the only market in which you could achieve broad class diversity outside of individual stocks. ETFs were also designed to overcome the drawback that mutual funds could only settle on the close of daily business at their Net Asset Value (NAV). Previously, broad diversification across market sectors could only be purchased or sold at the close of the business day based on the equity, bond or raw material elements included in the weighted averages of every component of the sector mutual fund—thus, ETFs came into play.

The first Exchange Traded Fund, the Spider or SPDR, was the S&P 500 depository receipt which was designed to track the S&P 500 stock market Index and began trading in January of 1993. No longer could an investor achieve broad market exposure on just the close of the business day, but could now buy and sell the broad market at any time throughout the trading day. Market makers and specialists provided liquidity for ETFs and continue to do so today.

During the May 2010 so called “Flash Crash”, the NYSE cancelled all trades .....

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2. Hot Market Report: Lean Hogs

By John Thorpe & Ilan Levy-Mayer, Senior Brokers

Click on image below to enlarge

HOGSfutures; Hogs, other meats, grains and a few other commodities been impacted with short term volatility as "trade war talks and talks about tarrifs" are heating up between the US and China.
Weekly chart of Lean Hogs Futures for your review above. Market been in a recent down trend but seems to be a bit overdone. With summer nearing, we may see a bounce. If June can hold the 70 mark, then we may have a chance at a medium term bounce. This is my opinion. This chart was prepared using our CQG Q trader software, which you can demo for 14 days with realtime data.
Lean Hogs Specs
Hours: 8:30 AM to 1:05 PM Central Time ( no night market)
Margins: $1320 initial, $1200 Maint.
Point Value: full point = $400 ( Example: 72.80 to 73.80 ). Min fluctuation is 0.025 = $10 ( Example: 72.80 to 72.825)
Some of the basic fundamentals to keep in mind when you are considering a trade in the lean hogs market:
1. Feed Feed costs represent approximately 65% of the production costs of pigs. Corn is the most commonly used livestock feed in the United States. If the price of corn rises substantially, farmers will tend to take their hogs to market at lower weights (younger) to avoid the high feed costs. That typically causes lean hog futures prices to drop as more supply comes on line.
2. Weather During the summer months and when the weather turns very hot, the hogs turn inactive and have a tendency not to be in prime breeding condition. Cold weather and freshly harvested corn create excellent breeding conditions from November through January. As a result of good breeding conditions, the largest number of pig farrowings is between March and May.
3. USDA Reports You can estimate the future amount of hog production by monitoring the USDA Hogs and Pigs Report. If the amount of newborn pigs are lower than previous quarters, it is likely the hog production will be lower six months later when they are ready for market.
4. China The emergence of China onto the world economic stage has many implications for U.S. hog producers. As China makes its transition from a developing economy to a developed one, the world will notice that a considerable percentage of its population is becoming wealthier, demanding more goods, and eating more high quality food. Pork, being the primary meat in Chinese diets, will face a demand surge.
5. Politics and Fiscal policy Currently, an impending tariff war between China and the U.S. has had an impact on prices. In Fact Not only did Lean Hog futures trade on lows this past Monday as a result of China imposing Tariffs on Imported Pork and Pork products, but Tyson Foods Stock also made lows on Monday, Both Markets rebounded handsomely, Late Monday and Tuesday. (the largest Pork producer in the U.S. is Smithfield foods, which was bought by the Chinese back in 2013) this fact was largely missed on Monday but disounted by the market on Tuesday.

Our brokers here at Cannon will be happy to chat about the HOG market, other meats and grains, options, futures spreads and much more! Feel free to contact us at any time.

3. Economic Calendar

Source: Moore Research Center, Inc.

Date Reports Expiration & Notice Dates
04/05
Thu
7:30 AM CDT - USDA Weekly Export Sales
7:30 AM CDT - Initial Claims-Weekly
7:30 AM CDT - Trade Balance(Feb)
9:30 AM CDT - EIA Natural Gas Report
3:30 PM CDT - Money Supply

 
 
 
04/06
Fri
7:30 AM CDT - Ave Workweek & Hourly Earnings(Mar)
7:30 AM CDT - Nonfarm Payrolls(Mar)
7:30 AM CDT - Unemployment Rate(Mar)
2:00 PM CDT - Consumer Credit(Feb)
LT: Apr Canadian Dollar Options(CME)
Apr Currencies Options(CME)
Apr Live Cattle Options(CME)
Apr Mx Peso Options(CME)
Apr US Dollar Index(ICE)
May Cocoa Options(ICE)
04/09
Mon

 
 
 
FN: Apr Live Cattle(CME)
LT: May Sugar-16(ICE)
 
 
04/10
Tue
7:30 AM CDT - Core PPI & PPI(Mar)
9:00 AM CDT - Wholesale Inventories(Feb)
11:00 AM CDT - WASDE Report & Crop Production
3:30 PM CDT - API Energy Stocks
FN: May Sugar-16(ICE)
 
 
 
04/11
Wed
6:00 AM CDT - MBA Mortgage Applications Index
7:30 AM CDT - Core CPI & CPI(Mar)
9:00 AM CDT - JOLTS-Job Openings(Feb)
9:30 AM CDT - EIA Petroleum Status Report
1:00 PM CDT - Treasury Budget(Mar)
2:00 PM CDT - Dairy Product Sales

 
 
 
04/12
Thu
7:30 AM CDT - USDA Weekly Export Sales
7:30 AM CDT - Initial Claims-Weekly
7:30 AM CDT - Export(ex-ag) & Import(ex-oil) Prices(Mar)
9:30 AM CDT - EIA Natural Gas Report
3:30 PM CDT - Money Supply

 
 
 
04/13
Fri
9:00 AM CDT - Mich Sentiment(Apr)
 
 
 
LT: Apr Lean Hogs(CME)
Apr Eurodollar Options(CME)
Apr Lean Hogs Options(CME)
May Cotton Options(NYM)
May Coffee Options(ICE)
04/16
Mon
7:30 AM CDT - Empire Manufacturing(Apr)
7:30 AM CDT - Retail Sales(Mar)
7:30 AM CDT - Retail Sales Ex-Auto(Mar)
9:00 AM CDT - Business Inventories(Feb)
9:00 AM CDT - NAHB Housing Market Index(Apr)
11:00 AM CDT - NOPA Crush
3:00 PM CDT - Net Long-Term TIC Flows(Feb)
LT: Apr Eurodollar(CME)
Apr Mx Peso(CME)
May Sugar-11 Options(ICE)
04/17
Tue
7:30 AM CDT - Housing Starts & Building Permits(Mar)
8:15 AM CDT - Capacity Util & Industrial Prod(Mar)
3:30 PM CDT - API Energy Stocks
 
FN: May Cocoa(ICE)
LT: May Crude Lt(NYM)
 
 
04/18
Wed
6:00 AM CDT - MBA Mortgage Purchase Index
9:30 AM CDT - EIA Petroleum Status Report
2:00 PM CDT - Dairy Products Sales
 
LT: May Platinum Options(NYM)
May Palladium Options(NYM)

 
FN=First Notice, OE=Option Expiration, LT=Last Trade

Disclaimer: This calendar is compiled from sources believed to be reliable. Moore Research Center, Inc. assumes no responsibility for any errors or omissions. It is meant as an alert to events that may affect trading strategies and is not necessarily complete. The release dates for certain economic reports may have been rescheduled.

* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.

** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.

*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!

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