Dennis Smith from Archer Financial Services, June 19th 2020



By Dennis Smith

Follow me on Twitter @denniscattle

Friday June 19, 2020


With futures coming off the session lows into the close for the second consecutive session, open interest yesterday jumped by 1,360. Overnight China has made a statement that they’ll accelerate the purchase of U.S. ag goods to meet the phase one trade agreement. This should be good news for hogs. The Chinese will only buy commodities that they need. THEY NEED PORK.After four months they’ve only secured 13% of the value they’ve committed to purchasing. Pork should be the big winner here, especially in light of the current price structure. So, take the strong possibility of increased export business with the fact that the U.S. is in the process of re-opening the food service sector and combined with the fact that we’ve embarked upon a massive sow liquidation phase, hog prices should bottom out.


The basis is now about $5 after residing at $20 a couple weeks ago. Cash has been doing most of the work. On June 1stcash steers traded at $1.18. Yesterday there was trade reported at 98 cents and as low as 96 cents. There were 10 deliveries posted against the June LC contract yesterday. The oldest long stands at Feb 3rd.OI in the June is 5,700 cars. Beef continues to grind lower and my sources suggest this will continue. The basis is swinging and soon all contracts will be premium to the cash. However, given the production coming down the pipe in the third quarter, up roughly 15% from this quarter, we’re expecting lower cash and lower futures. On-feed comes out today. Trade guesses are; on-feed 98%, placements at 95% and marketings at 74%. Hedging in both fats and feeders has been highly advised. Feeders closed lower yesterday and open interest was higher in every FC contract. Total open interest was up 509. Look for a mixed to higher open followed by a lower close, IMO.

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