Dennis Smith from Archer Financial Services, September 24th 2019

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Domestic Hog Prices in China Continue to Grind Higher By Dennis Smith

 

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Tuesday September 24, 2019

 

LEAN HOGS:

The national average hog price in China continues to move higher, daily, setting records. The latest quote is record high at 29.10, up .11. Retail pork prices in China are rising rapidly and they’re up over 80%. The WSJ has a major article today discussing the fact that China’s massive meat imports are driving up world protein prices. This is having a major impact everywhere but in the U.S. The U.S. pork producer is only getting a small slice of the increased business. Futures closed higher yesterday on volume of 46,600 with open interest increasing by 3,200. Based upon the headline news and off the fact that cash was slightly higher yesterday and not lower, look for futures to begin higher today. I suspect the rally won’t hold due to the fact that weekly production is record large. This week’s harvest is projected to be 2.631 million pigs. Each hog is carrying about three extra pounds compared to last year. Finally, despite all of the talk, despite all of the headlines, the product market is not on fire. We bought Dec hogs at limit down on Friday and we’re looking to liquidate these longs at 6925 today.

 

LIVE CATTLE:

The impressive rally in LC futures on Monday, in response to the friendly cattle-on-feed report, occurred on volume of 61,700 with open interest declining by 1,700 cars. Not exactly impressive stuff, technically. This week’s kill is projected to come in at 645,000 which is back down from last week’s pace of 658,000. The negotiated volume of trade was large last week at 93,000. Packers have cattle around them. Looking ahead, my sources indicate that packer contracts for Oct will be slightly smaller than contracted supplies in Sep. The FC rally occurred on volume of 14,800 with open interest nearly unchanged. Again, technically, less than impressive. I’m looking for feeders to top out. LC, maybe not, at least not just yet. Down the road, the large premium structured board will present a nice selling opportunity. Bullish? Then exports must ramp up big time. So far this year exports have been lower than last year. Production of beef, pork and poultry are projected to be record large moving into 2020.

 

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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