MORNING LIVESTOCK REPORT
By Dennis Smith
Follow me on Twitter @denniscattle
Tuesday July 14, 2020
CORN AND SOYBEANS: The forecast is getting wetter. The weather guys blew it again. For the producers that we’re selling the last two weeks, while everyone else was buying, you now have a free hedge. Recommend to move buy stops on short futures to break even. Look for a test of the June lows fairly soon.
Cash is called higher. When is the last time you’ve heard that? It’s been a very long time. Packers are looking for hogs. Open interest was up nearly 1200 contracts on the higher performance yesterday. The bull spreads are kicking into gear. Finally, finally it looks like hogs may do something very constructive on the price charts. Chinese customs data indicated their Jan-Jun pork imports were up 140%. Recent flooding along the main river in China in the southern part of the country is spreading the ASF virus. Regardless of what they report, they continue to have real problems in their re-population effort. They’ve been delisting plants in Brazil and in the EU, making the U.S. the number one supplier of pork. IMO this is an effort at expanding U.S. imports dramatically while saving face. That is to say, they can indicate the delisted plants for the aggressive U.S. buying not pressure from the Trump administration. With China, nothing happens by chance. We bought Aug futures yesterday and we’ve been buying the 54 and 56 calls. This could be the start of a major move upward.
Open interest jumped by 4000 cars yesterday after reaching a 4-year low on Friday. What does it all mean? In the short term I still expect a pullback to some degree. A major rally at this time of year would be most unusual. Demand has peaked and demand should remain sluggish for several weeks. Weights are running from 35 to 40 pounds higher than last year. This week’s kill is projected to be 659K, up slightly from last week’s pace. California is back-tracking, closing restaurants again. The food service sector just can’t get going with a full head of steam. Packers continue to have labor problems. I’m looking for a pullback in futures.
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