Dennis Smith from Archer Financial Services, July 23rd 2019

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Chinese Pork Import Data Released Overnight By Dennis Smith

 

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Tuesday July 23, 2019

 

LEAN HOGS:

Mixed close yesterday with volume reported at 54,900 and open interest up just 560 cars. This is not overly impressive. However, the cash had some starch, quoted up $3.50. Finally seeing a little competition at the packer level. Producers got themselves current and a heat wave caused weight gain issues, contributing to the current bullish situation. Too bad it appears to be fairly short in duration. The weather is already cooling off and we’re only about 30-40 days from the start of the fall hog runs. The fall runs will be nothing to sneeze at. Third quarter production is projected to come in at 6.785 billion pounds, up 7% from the third quarter of last year. Fourth quarter production is pegged at 7.420 billion, up 5.5%. These are record high production numbers meaning everything needs to be running smoothly to prevent problems, including rapid exports. Thus far in 2019, that’s just not been the case. Data from China was released overnight. In the Jan-Jun timeframe China has imported 818,700 MT of pork, up 26% from the same period last year. However, when applying U.S. weekly export shipping data against this figure it indicates the U.S. is only capturing about 15% of these exports. The evidence is compelling that tariffs have really hurt the U.S. pork producer. We strongly recommend a hedging approach on this rally.

 

LIVE CATTLE:

In the wake of the neutral to friendly on-feed report, LC futures closed higher on volume reported at 38,500 with open interest down 500. Feeders awoke from their slumber, posting a strong rally on volume of 12,500 with open interest down 375. Resistance in the Oct FC resides from 14700-15100. Consider this an ideal hedging zone. Resistance in the Oct LC can be expected starting at 11220. While beef demand appears to be solid overall, production dictates that hedgers need to hedge at resistance. Look for upside follow through today in futures. The show list is smaller, listed at 246,600 compared to 251,500 last week. The negotiated volume of trade last week was down 8% from the prior week at 95,600. Finally, the kill is projected to decline this week to only 645,000 compared to 651,000 last week. I consider the chart pattern friendly.

 

For a free 30-day trial to the evening livestock wire which includes a midday pork and beef update, please send an email to: dennis.smith@archerfinancials.com<mailto: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. In addition, the author of this piece currently trades for his own account and may have financial interest in the following derivative products: (corn, soybeans, soybean meal, soybean oil, lean hogs, live cattle, feeder cattle).

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