China Very Active in Booking US Pork
Dennis Smith of Archer Financial Services - InsideFutures.com - Thu Oct 10, 10:02AM CDT
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Thursday October 10, 2019
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LEAN HOGS:
First, volume on the rally in hogs yesterday was excellent at 75,400 with open interest rising nearly 2,300 cars. A nice build was evident in the summer contracts which are in the process of breaking out to the upside. Second, trade talks resume in D.C. today and both parties have shown clear evidence of wanting and needing a deal. Consider the odds pretty high that some sort of partial deal will be hammered out that saves face for both sides and reduces tariffs. Third, China was a huge buyer of U.S. pork last week, both for shipment this year and they made a huge purchase for delivery next year. Specifically, export sales were 31,300 MT, up 26% from the 4-week average. China was the largest buyer, by far, booking 18,800 MT followed by Canada (3,300), Mexico (2,700), S. Korea (2,300) and Japan (1,900). Pork shipments during the week were pegged at 26,700 MT, up 15% from the 4-week average. Mexico took 7,200 MT followed by China which received 6,700 MT of pork. In addition, the Chinese booked 123,400 MT of U.S. pork for delivery next year. This is more than one-third of total commitments for this year booked in one fell swoop. Headlines from the trade dispute will dominate but the bullish fundamental forces will be at work regardless of the headlines. Somehow, someway the Chinese will find a way to eliminate their tariffs on U.S. pork.
LIVE CATTLE:
While exports news was impressive for the pork boys, the export news in the beef sector was a disaster. Beef export sales last week were a negative 29,100 MT with Hong Kong cancelling 36,000 MT and Panama canceling 5,900 MT. Japan and S. Korea each booked 4,200 MT but Mexico was only in for 1,200. Shipments were pegged at 16,400 MT, up 1% from the 4-week average. LC futures volume yesterday was 55,200 with open interest down 300. Total LC open interest, at 303,000, is at the lows for the entire year. Most active Dec formed a doji pattern yesterday which typically signals that a change in direction is likely. We turned very active in executing hedges yesterday, adding to positions as far out as June. A few cattle traded at $1.10 in IA yesterday. Perhaps a higher cash tone will allow futures to edge upward again today????
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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).