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Thursday September 3, 2020
CORN AND SOYBEANS:
We are waiting to buy a pullback in corn. In soybeans, we’ve established short hedged positions in the options and will risk these to a close above 965. Soybean prices are at 2-year highs. You’d think this would attract profit taking, hedging and cash sales just ahead of harvest.
As Oct closed into a new high the open interest was up 2,100 cars with the Dec seeing a gain of 2,200. Consider this bullish. With the loins down $10 and the cutout down $1.00, if Oct hogs back up much today, the idea, the recommendation is to find a way to be long. I suspect the market is sensing that backed up hogs are dead and gone, surging export business will continue and that there may be a hole, a hole in numbers due to euthanasia and sow abortions that occurred last spring. These numbers have never been quantified and euthanasia was not part of the hog & pig survey. So, it’s up to the market to figure it out. Export sales from last week were very large at 53,600 MT, up 36% from last week and substantially higher than the 4-week average. China was the largest buyer, booking 28,700 MT followed by Mexico booking 14,700 MT. This is big business. Shipments were reported at 32,500 MT, down 3% from the 4-week average. China shipped 9,700 MT with Mexico taking 9,400 MT and Japan 4,200 MT. We managed to get some bullish positions on the book yesterday.
The wild trade in LC futures yesterday saw the open interest drop by nearly 3,000 cars. Open interest in the Oct dropped off by over 5,700. Fund liquidation IMO. Some pre-Goldman rolling as well. The downward pressure should remain in place with on-feed inventory record high. This fact is not going to change in the months ahead. Beef is headed lower. End users are booking pork aggressively in preparation for Oct pork month while moving to a hand-to-mouth mentality in the beef procurement process. Weekly beef export sales were poor at just 11,400 MT, down 19% from the 4-week average. There’s nothing to shout about here except for the fact that China was our third largest buyer, booking 1,800 MT. China purchased a record large amount of beef last week. Shipments were a bit better at 17,400 MT, but still down 2% from the 4-week average. Recommend to sell a test of yesterday’s highs. We are hedged. First downside target is 10100 in Oct LC and 13600 in Oct FC.