Old Man Winter Continues to Stress Cattle By Dennis Smith
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Thursday March 7, 2019
Cash is called fully steady with packers showing interest for animals next week. The weekly kill should come in close to projections. While never clear, it appears that demand for pork is on the increase and this explains how/why the cash tone is holding fully steady. Pork export sales last week were solid at 24,400 MT. China was not in our market for pork last week. Shipments were also solid at 26,400 and China received 12% of these shipments. So they just paid a 50% tariff to get ahold of U.S. pork. What happens to the volume of business when the tariff disappears? Mexico was a huge buyers in the face of tariffs as well. Cold storage comes out today. Total pork stocks are pegged at 582 million pounds or about unchanged from last year. Perhaps pork demand is better than we realize with huge and record large production yet frozen stocks are not increasing. Ham stocks are expected near 109 million pounds or about 10 million pounds lower than last year and belly stocks are expected around 46 million pounds or up slightly versus last year. It appears that hog futures are etching out a bottom. Technically, for confirmation of a meaningful bottom, we’re waiting for a close well above 7800 in the June. Almost forgot, another case of ASF was reported in China in a new province in the south, Guangxi province. According to my work this marks the 29th out of 34 provinces stricken with the disease.
Old man winter will continue to hammer away at thousands of cattle in the northern plains and Midwest. Cattle placements have been gravitating north and away from TX and KS in an effort to get animals closer to the feed source. This strategy is “blowing up” this year as winter conditions are severe in parts of KS, all of NE, all of the Dakotas, IA and MN. These cattle will never recover, weights will drop like a stone and feedlot conditions are so poor it will be May before conditions are vastly improved. This situation in combination with outstanding demand for beef should drive cash steer prices sharply higher than current levels. Weekly beef export sales were excellent at 24,700 MT with shipments reported at 14,500 MT. LC futures are wrestling with overbought status and large open interest. Neither of these is good enough to cause a meaningful top in my opinion.
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