Written Commentary
LEAN HOGS:
Cash was quoted sharply lower at noon yesterday but the late cash report confirmed that higher prices were paid. This amounts to a $3.50 swing in prices for the board to digest on the open today. The index should continue to grind higher. There is some weakness that has developed in the retail pork, both loins and butts have been weak to lower this week. However, hams and bellies are carrying the carcass. At some price, likely soon, we expect both loins and butts to attract demand and stabilize. There is no glut of hogs, no glut of pork. This week’s kill is coming in below both last week and last year. Weekly pork export sales were 26,800 MT, down 35% from the 4-week average. The slow down is expected as we approach the end of the year. Countries are focused on shipping previous purchased pork. Shipments were excellent at 36,600 MT, up 4% versus the 4-week average. China shipped 12,500 MT, a new weekly high pace (I believe) for China. Mexico was a close second, shipping 11,100 MT. By the way, Mexico purchase a huge amount last week, booking 13,800 MT, most of this likely hams. Look for hogs, led by the Dec, to open higher and likely close higher.
LIVE CATTLE:
Cash steer prices continue to edge lower with prices in the north very weak. NE traded cattle yesterday from 103-105 with the IA live price established at only 102. Dressed cattle in the north traded from 162-165, well off the recent trade of 169. Futures are weak and expected to start out soft to lower again today. Choice beef was down $2.13. Looking into November, we expect the beef to grab hold. However, the on-feed report is expected to be negative which is something we’ve been talking about for a long time. Record high on-feed inventory, record heavy weights, rising placements and sluggish beef have been on our worry list for a while. We’re not hedging down here and we failed to get short for the spec trader. What we are looking to do is begin accumulating long positions in the Oct 21 LC. We’ve also been covering short feeder hedges. Beef export sales were solid at 21,700 MT, up 13% from the 4-week average. Shipments were decent at 17,800 MT, up 6%.
For a free 30-day trial to the evening livestock wire which includes a morning livestock report and midday pork and beef update, send an email to: dennis.smith@archerfinancials.com
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