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Chinese Meat Imports Surge Over 11% in March  

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LEAN HOGS:

Open interest was down only 222 cars on yesterday’s slide in prices to sharply lower levels. Hedge selling. In other words, these guys are aggressive and drive prices lower to get orders filled but there’s willing buyers to take the other side of the position. Summer hogs, versus the fundamentals are undervalued. Hedgers are willing to take the short because the industry is starved, literally starved for profits. Hedging is also encouraged by a lot of “bad information” out there in the form or poor analysis. Chinese customs data just indicated that Chinese meat imports during March surged by over 11% compared to March of 2020. There’s been some confusion regarding pork prices in China. Prices have been declining but they remain highly elevated. We believe they’re declining due to a surge in marketings of butchers out of fear of being flagged to be culled. ASF continues to spread. Baby pigs in China fetch $275 each. The March meat import data confirms the situation. IMO, China is facing a severe food insecurity situation. Frankly, we’ll never know the whole truth. I go by what they do not by what they say; meat imports during March were up more than 11%. If July hogs weaken up again, we’ll look to buy some calls which in effect will replace some of our lost ownership in the April upon expiration on Thursday. Stay tuned for these ideas to bubble to the surface. In the meantime, we continue to roll our long Dec LH 98 calls down to the 90-strike price for 150 points or less.

LIVE CATTLE:

Open interest was down 975 cars in LC yesterday. Interesting to note that OI in feeders edged higher by 582 cars. This could be new hedge selling in feeders. We purchase some May 140 puts at 80 points yesterday for a spec and conservative hedge play. I remain clearly bullish toward live cattle futures based upon the outlook for a continued surge higher in cash steer prices and a rising wholesale beef complex. I’m expecting increasing levels of support to develop near 12200 in the June. Deliveries against the April LC contract shut off. This should sponsor a nice jump in April futures. I’m bullish LC futures.

 

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