Chinese Step Back Into the U.S. Pork Market By Dennis Smith
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Thursday May 23, 2019
There’s no early read on the cash hog market but it likely will be soft to lower. Packers have gotten the cash sliding and they’ll keep it that was as long as possible. Someday, don’t know when, we’ll see the hog carcass jump by over $10.00 in one week and then we’ll be off to the races again…but apparently not now. Cutout took a dump off lower prices of ribs and bellies. Really, Bellies should be moving higher at this time of year. Frozen belly stocks do not indicate any sort of problem. Belly stocks at the end of April stand at 61.1 million pounds compared to 64.5 last year at this time. Weekly pork export sales were outstanding at 46,300 MT, compared to 10,500 MT in the previous week. China came in for 31,400 MT with Mexico the second largest buyer, taking 5,700 MT. Look for Mexico to increase their purchases next week with tariff-free pork available to them this week. China has now booked 195,000 MT of U.S. pork and shipped 73,000 MT. The Chinese offtake from today’s report was 4,500 MT. Total shipments were 24,100 compared to 23,500 MT in the previous week. This news should provide a strong market today.
Beef export sales were excellent at 24,400 MT, up 30% from the 4-week average. S. Korea was a huge buyer last week, purchasing 9,100 MT followed by Japan at 5,900 and Mexico purchasing 2,000. Shipments at 17,900 were up 10% from the 4-week average. This might support futures today but the fact that cash continues to slide lower will likely prevent a sharp rally from occurring. After next week’s short kill the production pace is expected to pick up dramatically, pressuring wholesale beef lower. Packers are then expected to continue cherry picking the show list while expanding margins. The result will likely be lower trending cash steer prices during the course of the summer. Use any sharp bounce today to add to existing hedges. Note that in last night’s wire we have a feeder cattle hedge strategy.
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