By Dennis Smith
Follow me on Twitter @denniscattle
Thursday October 17, 2019
Cash is called steady to up $2.00 for today. Cash has risen every day so far this week. Futures pulled back yesterday, providing a nice buying opportunity in the Dec hogs. Futures volume yesterday was 60,400 with open interest down 5,600. OI came out of the Oct contract at expiration so actual open interest from yesterday’s action was down 1,200. Headline news that China is prepared to do some commodity buying ahead of another round of negotiations for phase one lifted the grains overnight. If it’s supportive to grains it should really be supportive to the hogs. The story is circulating today that Tyson is moving to ban paylean from its pork production and processing by Feb 4th. We reported this at midday yesterday. With all three major packers, Smithfield, JBS and now Tyson, this paves the way for massive pork exports to China. Vietnam will need pork. Pig prices in Vietnam are up 70% from January. They’ve lost nearly 20% of their herd, or more than 5 million pigs. The disease is still spreading although officials in Vietnam claim that the spread is “slowing”. The FAS issued a report recently that is way too conservative in their projections for increased exports to China and the rest of Asia. Weekly export data should be bullish when released in the AM. Look for hogs to rally today.
I’ve not heard of any widespread cash cattle trade yet this week. The USDA reports that IA has traded about 4,000 head this week at $1.11. LC futures saw a build in open interest yesterday with the total up 1,800. It appears that sellers, hedgers, are stepping into the deferred contracts. Open interest was down 1,200 in the Oct but edged higher in all other contracts. We’ve been stepping into cattle hedges since early in Oct. We’ll continue to add with the expectation that futures could and likely will top any minute. Cattle on feed comes out one week from Friday. I’ve not heard any estimates on this report yet. The FAS report cited in the hog comments is projecting beef production for next year to rise nearly 3% and to be record large. Exports are also projected to be record large. However, in contrast to the pork in which exports will comprise more than 25% of production, beef exports next year will only be about 12% of expected production.
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