New Shorts Entering the Live Cattle Market By Dennis Smith
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Thursday May 17, 2018
Running late today so I’ll be brief. Weekly pork export sales were good for last week at 21,900 MT, up 12% from the 4-week average. Shipments, at 22,400 MT were unchanged. Cash was steady yesterday but expected to be higher today. Packers continue to face tightening supplies of butchers while demand for U.S. pork is improving. Certainly pork is priced to move. Loins and hams remains historically low. Short covering was the feature yesterday with open interest dropping in the Jun by another 3,100. We’re expecting a rally and a test of the April highs fairly soon.
New shorts entered the fray in LC futures yesterday with prices dropping for the third session (hard) while open interest was up nearly 2,100 cars. Cash is dropping fast with our-front delivery prices sharply lower. Now the beef is beginning to falter with choice cutout down .61 last night. LC and FC are oversold but IMO they’ll remain oversold until this move is complete. Then we’ll likely enter a choppy phase for a spell before forging any kind of bottom. A bottom, however, is not in sight yet. We remain unhedged in the June but fully committed to hedges in the Aug and some in the Oct with none in the Dec and Feb. We’re still holding the Jun/Aug bull spread and we’re still short in the FC. IMO upside recoveries will be shallow and short lived. Weekly beef export sales were poor, at 11,000 MT they were down 34% from the 4-week average. Shipments were a bit better at 16,400 MT, up 3%.
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