Weekly Pork Export Sales Huge
By Dennis Smith
312-242-7905
Thursday, November 4, 2021
GRAINS:
We were stopped out of long Dec soybean oil positions overnight at our stop price of 6042. The overnight low was 6016. Prices have since staged a full recovery with crude oil higher. However, the bearish soybean fundamentals appear to be a major drag on the bean oil. I expect this to continue. In fact, it appears that soybeans are about ready to take a major dump. We sold corn yesterday. I want to sell soybeans today. Consider the following strategy using Jan options. These expire Dec 23, or 49 DTE. The margin on this strategy is $2,100 compared to the futures margin of $3,400.
- Buy Jan soybean 1220 puts/sell 1270 calls at even money.
LEAN HOGS:
Holy hams!! Weekly pork export sales were huge at 45,700 MT, up 72% from the 4-week average. Mexico was a huge buyer (hams), booking 18,500 MT followed by China which booked 16,000. Japan was in for 3.5, Canada 2.5 and South Korea 2.0. Shipments were nice at 33,800 MT, up 9% from the 4-week average. Product is leaving the country through Oakland, CA. Mexico received 15,800 MT, China 4,400 followed by Japan, Columbia and South Korea. The ham business to Mexico is not a surprise as we’ve been discussing this almost daily. Bone-in hams, last week below 50 cents/lb, were cheap. In a world full of inflationary pressures, there’s not many cheap sources of protein. The carcass was up over $6.00 yesterday in the wake of a nearly $2 jump on Tuesday. I look for Dec futures to gap higher today. Let them run. No recommendations. I’m bullish.
LIVE CATTLE:
Weekly beef export sales were pegged at 16,700 MT, up 15% from the 4-week average. South Korea was the largest buyer of U.S. beef last week, booking 6,700 MT followed by China (2,800), and then Japan. Shipments were solid at 16,800 MT, up 3%. South Korea, Japan, and China were the largest shippers of beef last week. The Chinese ban on beef from Brazil remains in place and each week the Chinese middle class will get more accustomed to the taste and texture of U.S. beef. This is a huge opportunity for the U.S. beef industry. I still can’t believe it’s not garnering more headlines. Look for cash trade either today or Friday likely at $1.30 or higher. Open interest was up 2,100 cars on the rally yesterday. Look for upside follow through today.
- Work orders to unwind the Nov LC 132/136 call spreads at 180 points. These expire Friday.
For a free 30-day trial to the evening livestock wire please send an email to: dennis.smith@archerfinancials.com
