Cash Hog Prices Still Not Done
By Dennis Smith
Follow me on Twitter @denniscattle
Tuesday September 25, 2018
Cash is called steady to higher which is a change from just outright higher of the last three weeks. Still, the product pipeline remains clean and expect additional gains in the cutout value this week. The cold storage was sloppy but I’ve also been hearing that pork packers, fully aware of the gravity of the situation in China, are socking cheap pork away knowing it will be delivered to China at a much higher price down the road. Futures continue to grind higher with the performance of the Oct/Dec spread still signaling that cash is not done. Consider that the situation in China, as they battle ASF is far worse than what is being reported. Consider, however, that the upcoming hog & pig will likely be a negative in that record large production down the road will be confirmed. Consider that Oct and Dec are no longer premium to the cash as they have been. Consider that futures are attempting to break out to the upside. Yes, an awful lot to consider. We’re bullish but preparing to establish some hedges for 4th quarter production after lightening the load on spec length yesterday.
Live cattle futures stumbled and tripped yesterday after the on-feed report confirmed active placements and record large numbers of cattle in the feed yards. The cold storage was a bit negative as it showed larger beef stocks than expected. The open interest increased yesterday on the “downer day” confirming that new shorts are entering the fray. Technically yesterday’s action confirmed a near term top is in place. The weekly cattle kill is projected to come in at 652,700 or slightly smaller than last week’s big harvest of 657,000. The show list is slightly larger this week. Look for additional downside pressure this week. Exactly when and where support develops, we’re just not sure. Look for downside follow through in feeders as well.
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