Dennis Smith from Archer Financial Services, China has Eliminated Extreme Poverty…Really?

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China has Eliminated Extreme Poverty…Really?
By Dennis Smith
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Tuesday November 24, 2020

CORN AND SOYBEANS:
It’s Tuesday in a short week with FND and end of the month approaching. Corn and soybeans are pulling back on profit taking after stabbing contract highs yesterday but not closing really strong. Soybean oil is sharply lower coat-tailing sharply lower palm oil. Palm oil is lower because China canceled a few cargos of palm oil to likely switch to cheaper soybean oil. So I would not look for much of a setback in the soybean oil.

Be aware to two things this morning. Frist, meal is only slightly lower. This will support soybeans fairly quickly. Second, the harsh, threatening weather pattern in South America is not changing. RECOMMEND TO ROLL DEC CORN LONG POSITIONS INTO THE MARCH TODAY AND TOMORROW. FND is Monday which means all spec longs need to be out of Dec corn by the close Friday. All markets are closed Thursday and I will not be in the office Friday, Pat will be.

LEAN HOGS:
China recently announced at the G-20 that they have eliminated extreme poverty in China. Wow! That’s great. It’s worth noting, however, the Chinese government defines extreme poverty as anyone that makes less that $5.50 per day or around $1,750 per year. I dare someone to fly to China, rent a jeep, drive to a small village and ask residents how it feels now that extreme poverty has been eliminated.

Concerning hogs, packers are booked for this week and securing loads for next week. I doubt they bid higher for anything. Cutout was down .40. The kill, estimated yesterday at 497K is impressive if left unrevised. However, there remains a labor problem at packing and processing plants. Pork is different than beef in that further processing is required for many pork items. This takes labor which is in very short supply. This is why there is no pork moving into the freezers (total frozen pork down 27%) which is creating a glut of fresh pork. Despite the fact that weekly kills continue to run well below projections and in some cases actually below year ago levels, the market is struggling with an excessive amount of fresh pork. This, combined with the fact that packers are controlling the kill of packer owned animals to keep weights up, to prevent rising prices, will continue to kill rallies, at least in the short term. No recommendations.

LIVE CATTLE:
The powerful move in LC futures occurred on exactly unchanged open interest. How does that happen? There was no cash trade reported yesterday. Asking prices are clustered near $1.10 and they’ll likely receive this, IMO. Cash traded at 109-110 last week. Look for the bulk of trade to be done by end of business tomorrow. I want to buy Oct LC on a pullback toward 11300. On weakness I might consider some bullish positions in Feb options, we’ll see. Beef is on fire and I’m not so sure it will cool off after Thanksgiving. Choice beef is priced above $241.00. Most of us thought a move to $230 would be as far as choice would move during Nov. Cash steer prices are too cheap and the board is too cheap relative to where the beef is easily clearing retail channels. I’m bullish.

For a free 30-day trial to the evening livestock wire please send an email to : dennis.smith@archerfinancials.com

The risk of loss in trading futures and options on futures can be substantial. The author does not guarantee the accuracy of the above information, although it is believed that the sources are reliable and the information accurate. The author assumes no liability or responsibility for direct or indirect, special, consequential or incidental damages or for any other damages relating or arising out of any action taken as a result of any information or advice contained in this commentary. The author disclaims any express or implied liability or responsibility for any action taken, which is solely at the liability and responsibility of the user. This report is a solicitation.

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