By Dennis Smith
Follow me on Twitter @denniscattle
Tuesday March 30, 2021
How quickly some people forget. All of the analysts predicted a kept for market hog inventory even with last year. They seemed to have totally forgotten what occurred a year ago. May of 2020 was right in the middle of the huge mess created by COVID disrupting the packing plants. Huge numbers were backed up. Barns were full, bursting with hogs. Some butcher hogs were being buried. The easier solution was to euthanize baby pigs and abort sows. None of this was ever measured and quantified by the USDA. I contacted the person responsible for publishing the hog & pig reports, communicated directly with this person and was told (for the Sep report) they decided to not conduct a special survey in an effort to quantify. In other words, they were content to simply let the market figure it out. We are now marketing the animals that were bred in the first part of May. There’s a huge hole. Numbers will likely be down 5% to 10% for weeks. The pork shortage is real and long-lasting. The export market is alive and well. The shortage of trimmings has sow plants bidding for product. Producers are culling heavy sows aggressively, exiting the business. The fundamental situation is bullish, very bullish.
The tone in the cash steer market is changing. The attitude at the feedlot is changing. I heard today that a few large feedlots in the south have decided to stop marketing cattle on a formula basis, instead moving to the negotiated market. This is a major change in attitude. Open interest in futures was up 2,790 cars. The massive double top and key reversal in the most active June contract was nullified yesterday. Feeders exploded and broke out of a long-term range. Many cattle guys, having been abused for so long, can’t and don’t believe what’s happening. THE CASH STEER MARKET IS AWAKING FROM ITS SLUMBER. This market has been severely undervalued for 18 months. Don’t sell it short. The point is to utilize the options to allow us to assume a long position. IMO, cattle futures are about to explode higher.
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