Pork Shipments Exceeded Sales
By Dennis Smith
Follow me on Twitter @denniscattle
Thursday June 13, 2019
Corn prices are moving into fresh contract highs today led by the July contract. The July/Dec spread is picking up three cents which is a huge one day move in a corn spread. Consider that moving forward a newly priced corn market should give pause to anyone considering herd expansion, not to mention the lousy performance of the lean hog futures market. The problem with the lean hog market is the FACT that exports are lousy. First quarter exports were down 6.4% and April exports were down 4%. The USDA is projecting exports this year to surge by 10% over last year. It’s time to start moving pork out of the country. Weekly data showed shipments exceeding sales. We need to see shipments kick into high gear, perhaps this is the start. China shipped a new large amount, 5,200 MT. Mexico shipped 7,600 MT with Japan, S. Korea and Canada all shipping large amounts of U.S. pork. The Chinese government reported the Chinese sow herd was down 23.9% in May compared to May of last year. The April sow inventory was down 22.9% so they lost 1% of their sow herd during May, or approximately 350,000 sows. I’m guessing, yes, guessing, that hog futures turn higher and bottom out on either side of the June expiration.
The bullish cattle trader got lashed with a whip yesterday with prices at one point nearly limit down. Prices recovered off the lows into the close but all settlements were sharply lower. Futures were limit up on Monday and higher again on Tuesday. Consider that the outside day lower close likely put in the seasonal high about two to three weeks early. Volume was not heavy on the break with open interest dropping 2,500 cars. Cash trade is looking to be steady at best. Weekly beef export sales were lousy at 16,400 MT, down 18% from the 4-week average. Shipments were reported at 18,200 MT, up 8%. This data is not bullish. Strongly recommend using any recovery in prices on Thursday and Friday to add to existing hedges. We’re looking at bearish risk reversal strategies in the Aug FC. Third quarter beef production will be at a 16-year high and 4th quarter production will be record large. Look for the downtrend to remain intact.
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