Best Performing Stock in Asia is a Pork Company By Dennis Smith
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Tuesday March 5, 2019
Impressively, cash hog prices are stabilizing after a 12% drop in February. April futures at one point (last week) traded par with the CME lean hog index. Now, a week later, the April contract is sitting 500 over the index. The index continues to edge lower but should be near a bottom. Open interest continues to come into the hog futures with yesterday posting an increase of 1,500 cars. Pre-Goldman Rolling appears to be taking place. The U.S. futures market is actually sending a signal to U.S. hog producers to go ahead and end the expansion. They been suffering huge losses for several months and the premium in the summer months is not terrific and all contracts are in a downtrend. I’m hearing that pork production in the EU will decline 1% to 2% this year. With ASF in Belgium this makes total sense. The debacle in China continues to unfold with very little information flowing from China on the ASF situation. We talked about this in the wire last week; the best performing stock in Asia is a pork producer named Muyuan Foodstuff Co. The stock is up 85% this year and up 142% since ASF was discovered in China last August. The company is rapidly building a 2 million head per year slaughter facility so they can process more pigs without shipping out of their province. Speculators are anticipating that the price of pork is going to skyrocket in China in the months ahead. Some estimates regarding the size of the cull and breeding herd liquidation are mind boggling. Yet the U.S. futures market is not concerned, at the moment.
Futures pulled back yesterday on active volume of 91,500 with open interest rising by nearly 3,400 cars. Similar to the hogs, a pre-Goldman Roll appears to be occurring. The Goldman Roll officially begins Thursday and runs for five sessions. The show list is estimated at 258,800 compared to 274,000 last week. Numbers available for this week are down substantially in the north. Some cattle traded yesterday at steady money with last Friday. NE traded 1000 head at $205 in the meat and IA sold 725 head at 128.50. Not sure why these feedlots caved in on a Monday with a steady bid from Friday. The beef is moving higher and we’re expecting both cash and futures to be higher by the end of the week. A bullish cattle-on-feed report is expected on Friday.
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