Food Prices Soar Higher in China During December By Dennis Smith
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Thursday January 9, 2020
Cash is called steady to possibly lower. Yesterday’s cash was mixed to lower but overall the cash has been flat so far this week. Clear evidence that exports in Nov soared to record highs with China business huge, despite the presence of tariffs during Nov, did not drive futures sharply higher yesterday. Bullish news continues to trickle out of China. Chinese food prices in Dec were up 17.4% compared to Dec of the previous year. Their CPI was up 4.5% which is well above the upper end of the target of 3%. This CPI is the highest in seven years. The Chinese commerce ministry said they will increase pork imports and continue to pull from the reserve in an effort to stabilize pork prices. This tells me that the Nov activity was a warm up drill. However, until the cutout soars, forcing cash bids sharply higher, futures likely won’t rally.
Look for a higher cash steer market again this week. Futures are pulling back with today day three of the correction. The correction has been very shallow. Demand for feeders at auction barns has been excellent. Feeder futures are out-performing the live. Look for a surge in demand for beef with the choice beef heavily discounted to move. Choice beef is only $3.00 over the select. The impact from the Goldman Roll was obvious with OI in the Feb LC dropping by 14,000 while total OI was up 3,000. We continue to hold the Feb/Jun bull spread and we continue to accumulate the April LC 140 calls.
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