Dennis Smith from Archer Financial Services, Chinese Hog Prices, October 8th 2019

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Chinese Hog Prices….The Dog Hit the End of the Chain By Dennis Smith

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Tuesday October 8, 2019

LEAN HOGS:

Does it matter what the cash market does today? It should but will it? Cash was up .50 to $1.00 yesterday. The CME lean hog index stands at 5922 with Oct futures closing yesterday at 6050. So convergence is happening quickly. Suddenly the Dec contract is not very far from the index. Futures were limit down yesterday meaning we’re on expanded range of limits today, 450 points down or up. Open interest surged higher by 4,000 contracts yesterday. In the wake of the week long Chinese holiday the dog may have hit the end of the chain. Reported overnight the Chinese domestic hog price for 10/08 is 32.56, up 3.58 which equates roughly to $2.84 per pound. Chinese hog prices are more than five times higher than U.S. hog prices. Contrary to what many believe, there are still Chinese tariffs on U.S. pork. China has a major problem on their hands. Trade talks later this week are not expected to go well which is why futures closed limit down yesterday. I’d look for buying to surface today.

LIVE CATTLE:

Open interest in LC was down 345 cars yesterday. The negotiated trade last week was reported at 93,000 which is up 3% from the prior week. Packers have inventory around them. The show list is substantially larger this week, estimated at 289,300 compared to 263,300 last week and 225,936 last year. The week’s kill is projected to come in at 645,000 compared to 647,000 last year. Beef is at lows for the entire year and searching for a seasonal bottom but not there yet. Dec futures filled the gap on the chart yesterday. We’re anticipating a seasonal high in futures. It’s time to begin selling futures for both the spec player as well as the hedge client, in my opinion. Look to execute all hedges in the Dec, Feb, April and June.

For a free 30-day trial to the evening livestock wire which includes a midday pork and beef update, please send an email to: dennis.smith@archerfinancials.com<mailto:dennis.smith@archerfinancials.com>

The risk of loss in trading futures and options on futures can be substantial. The author does not guarantee the accuracy of the above information, although it is believed that the sources are reliable and the information accurate. The author assumes no liability or responsibility for direct or indirect, special, consequential or incidental damages or for any other damages relating or arising out of any action taken as a result of any information or advice contained in this commentary. The author disclaims any express or implied liability or responsibility for any action taken, which is solely at the liability and responsibility of the user. In addition, the author of this piece currently trades for his own account and may have financial interest in the following derivative products: (corn, soybeans, soybean meal, soybean oil, lean hogs, live cattle, feeder cattle).

 

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