Reality Is Pushing Hog Futures Into the Gap By Dennis Smith
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Thursday September 19, 2019
Cash will be called lower simply because of the huge numbers coming down the pipe and due to the fact that product is showing no signs of strength. I’ve been told by several that cash prices are low enough. Really? Packers are now booked thought most of next week. Why would they turn the bids higher in this environment? Exports sales were sluggish at 14.2 MT which is down 34% from the 4-week average. Shipments were better at 24.3 MT, up 2%. Japan, S. Korea and Mexico were buyers of about the same amount of pork last week. The largest shipper of pork was Mexico, moving 8,500 MT followed by China which received 5,900, Japan at 3,100 and S. Korea at 2,100. This is not bad business but it does not match up with the hysterical headlines of last week. Headlines drove prices sharply higher last week and reality is pushing prices back down and into the gap created last week. On a sharp break we’ll look to purchase the Dec 74 calls. Also look to establish long term bull call spreads in the June options.
Beef export sales were average at 16,600 MT, down 1% from the 4-week average. Shipments were 17,100 MT, which was up 11%. Two weeks ago Hong Kong was a huge buyer of beef, last week they took only 2,400 MT. S. Korea was our largest buyer last week and Japan was our largest shipper. There is nothing here to move futures higher in my opinion. Yesterday’s impressive rally in LC futures occurred on very poor volume of 48,000 with open interest down 1,800. I’m not bullish yet I’ve been clearly wrong about the direction of futures and the direction of cash steer prices. I’ve been correct about the direction of the beef market but of course we’re not trading cutout values. The industry is bullish. I believe they’re making a mistake. Look for a mixed open.
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