China Purchased U.S. Beef Last Week
By Dennis Smith
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Thursday April 16, 2020
Cash is called lower. Two Smithfield processing plants will close for two weeks. These plants process hogs into retail product and they are fed by the Sioux Falls slaughter facility. Not sure why the company can’t ship pork from their east coast plants. Likely because most of this pork is slated for shipment to China. Thus, the warning from Smithfield of a pork shortage. Mother China is calling in most of the Smithfield pork. Weekly pork exports were reported at 45,700 MT with China booking 16,400 and Mexico booking 13,000 MT. Shipments were 36,600 MT with China receiving 18,400 and Mexico receiving 4,900 MT of pork. These numbers are OK but nothing off the charts huge. However, we continue to hear exports from this week, reported next week will be huge. Not sure what happens today in futures. Support can be expected in the Aug, Oct and Dec. May and June likely move lower under the weight of cash. July is caught in the middle. On weakness we’re recommending bullish option strategies in Aug. Yesterday’s volume was 39K with open interest increasing by 1,500.
LC futures volume yesterday was 43,900 with open interest up 750. FC volume 11,900 with open interest up 850. Weekly beef export sales were good at 20,200 MT. These sales were up 16% from the 4-week average Guess what, China booked 1,500 MT of U.S. beef last week. Shipments were 16,700 MT, down 2%. I have no fresh slaughter plant news to report this morning. Cash has traded at sharply lower levels but not in high enough volume to really call it the market. A few hundred head have traded at 94 to 95 cents and from $150-$152 in the meat. These prices are sharply lower compared to last week. In fact, if 95 is the market, April futures are trading at this price level. Beef is moving higher and margins are jumping from $300 per head a few days ago toward $400 per head. Of course, feedlots have zero leverage. The kill is running way light compared to both last week and last year. The only hope is that explosive margins will shame the packers into stabilizing the cash steer market. In addition, the hope is that the current slaughter situation will be resolved within two to three weeks. The upcoming on-feed report should be bullish from a supply perspective…if that matters. Trump will address the topic of re-opening the economy later today. This really matters. Baring a disaster at the packing plants, it’s our opinion that futures have bottomed. We are trading accordingly, assuming marginable positions in the market for the first time since February.
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