Most Are Expecting Higher Cash Steer Trade This Week By Dennis Smith
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Tuesday January 15, 2019
Cash is called fully steady to perhaps higher for today. Yesterday’s kill came in a bit larger than expected. Another storm system will track across the S. Midwest later this week with temperatures dropping severely this weekend. Tough weather for livestock, tough weather to move livestock. The Goldman Roll and index fund rebalance is now complete. Pork remains stable. We continue to miss export data. President Trump made the statement to the American Farm Bureau that China will open its market up to U.S. pork. When? We need to see the 50% tariff dropped before hogs will likely bottom and show the ability to sustain a rally. I expected this to happen already which is one area in which I’ve “misfired”. China has released their official estimate of over 900,000 pigs culled due to AFS. This is up from the previous estimate of 600,000. Most believe the situation is far worse than what is being reported. It’s been reported in 24 out of 34 provinces. I’ll provide more information on this subject in tonight’s wire. This week’s kill is projected to come in at 2.519 million which is lower than last week’s 2.556 harvest yet still up 3% from the year ago kill. We’re not sure that Trumps comment will give the market traction. His comments severely lack detail.
The show list is estimated at 276,000 compared to 246,900 last week and 247,800 last year. Weather is going to get rough keeping feed lot conditions in very poor shape. Severe cold this weekend will only freeze the muddy feed lots and make it extremely difficult for cattle to move around. Weight loss is what we’re talking about. Look for the bull spreads to continue working and grinding higher. This should occur despite the larger show list offerings. Most are expecting another round of cash strength after $1.24 was paid last week. The negotiated volume of trade last week was only 79,000 suggesting that packers will need more cattle this week. Look for Feb to lead the rally now that the Goldman Roll is complete. Our first upside liquidation target on the Feb/Jun spread is 880 over.
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