Dennis Smith from Archer Financial Services, July 30 2020



By Dennis Smith

Follow me on Twitter @denniscattle

Thursday July 30, 2020


Cash is called steady. The carcass was lower. In the wake of the surge on Monday, cash has been flat. The weekly kill is projected to be about 8% larger than last year as we continue to wade through backed up supplies. Yet, while this is happening weights continue to edge lower. Weekly export sales were excellent at 39,600 MT, up 12% from the 4-week average. China was the largest buyer, taking 17,800 MT with Mexico second at 15,400 MT. Shipments were reported at 31,500 MT, down 3% from the 4-week average. China received 10,200 MT with Mexico taking 9,200 MT and Japan receiving 4,400 MT. Hog prices would be a total disaster, likely below 20 cents/lb if it were not for the large Chinese presence. Futures are struggling. Given a close below 5300 in the Aug and I recommend dumping our Aug 54 calls. We’re long futures from 5000 with a breakeven stop in place. Hogs continue to disappoint.


Cash steer trade was active yesterday with the following trades reported by the USDA in their late wire. TX 6000 at 97 cents, up 1, KS 13000 at 97, NE 5000 at $160 and IA traded 2200 in the live at 101 and 3100 dressed at $160. These prices are a touch higher than last week. Beef was lower with choice dropping $1.85. So, does the higher cash mean futures continue to rally? Well, futures is already at a substantial premium. There’s a seasonal for Oct LC to top today and trend lower during the entire month of August. We like the premiums and we’re ready to do some hedging. Partial hedges are highly recommended in the Oct (fall production) and in the April (spring production) while leaving Dec and Feb unhedged right now. Food service demand is not expected to recover anytime soon. The economy stinks. Exports were excellent and at a marketing year high of 29,500 MT. Korea bought 11,500 MT with Japan taking 10,600 MT. This sales figure was up 81% from the 4-week average. Shipments, at 18,300 MT were up 19% from the 4-week average.


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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