The slowing of price advance suggests most are privy to the current circumstances. This has had no impact on funds yet, as the open interest now is just shy of 350,000 contracts.
My analysis suggests to anticipate a jaunt back to around the $115.00 area February. This could be achieved in short notice with the looming information this week and next. More volatility is anticipated than anything. I see nothing to do at this juncture.
A trade to the $115.00 area February would have me looking to own the August, October or December contract months. With $98.00 being the lowest price paid, when numbers and weights were heavier and demand softer, it is difficult to see producers put themselves back into a similar situation. However, if they do, then at the current price of back month futures, that is $5.00 to $6.00 lower from present.
Were producers astute enough to keep from creating a similar production scheme, then it is perceived possible to keep prices from eroding to the $98.00 level again. So, if demand were to just stay at this level, I could see the likelihood increasing that the spread is narrowed much closer by convergence in the middle rather than futures going to cash or cash going to futures.
Like the fats, I can see the potential for traders to push spring feeders back to the area between $123.00 and $126.00. Not that I would necessarily be a buyer there, but this is an area of interest.
A little volatility crept in this morning with the opening of the FCE. Some top trades of $124.00 were few, but gave the futures a boost and feeder futures along with them.
I see little to do at this juncture. The market needs some room to breathe and I recommend giving it some space.
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