Dennis Smith from Archer Financial Services, June 13th 2019

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Pork Shipments Exceeded Sales

By Dennis Smith

 

Follow me on Twitter @denniscattle

 

Thursday June 13, 2019

 

LEAN HOGS:

Corn prices are moving into fresh contract highs today led by the July contract. The July/Dec spread is picking up three cents which is a huge one day move in a corn spread. Consider that moving forward a newly priced corn market should give pause to anyone considering herd expansion, not to mention the lousy performance of the lean hog futures market. The problem with the lean hog market is the FACT that exports are lousy. First quarter exports were down 6.4% and April exports were down 4%. The USDA is projecting exports this year to surge by 10% over last year. It’s time to start moving pork out of the country. Weekly data showed shipments exceeding sales. We need to see shipments kick into high gear, perhaps this is the start. China shipped a new large amount, 5,200 MT. Mexico shipped 7,600 MT with Japan, S. Korea and Canada all shipping large amounts of U.S. pork. The Chinese government reported the Chinese sow herd was down 23.9% in May compared to May of last year. The April sow inventory was down 22.9% so they lost 1% of their sow herd during May, or approximately 350,000 sows. I’m guessing, yes, guessing, that hog futures turn higher and bottom out on either side of the June expiration.

 

LIVE CATTLE:

The bullish cattle trader got lashed with a whip yesterday with prices at one point nearly limit down. Prices recovered off the lows into the close but all settlements were sharply lower. Futures were limit up on Monday and higher again on Tuesday. Consider that the outside day lower close likely put in the seasonal high about two to three weeks early. Volume was not heavy on the break with open interest dropping 2,500 cars. Cash trade is looking to be steady at best. Weekly beef export sales were lousy at 16,400 MT, down 18% from the 4-week average. Shipments were reported at 18,200 MT, up 8%. This data is not bullish. Strongly recommend using any recovery in prices on Thursday and Friday to add to existing hedges. We’re looking at bearish risk reversal strategies in the Aug FC. Third quarter beef production will be at a 16-year high and 4th quarter production will be record large. Look for the downtrend to remain intact.

 

For a free 30-day trial to the evening livestock wire that includes a daily 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).