By Dennis Smith
312-242-7905
Tuesday, February 21, 2023
GRAINS:
The trade continues to focus on crop losses in Argentina. How many times can we kill this crop? No trade rec. There’s so much going on in livestock today. I’m cutting the grain comment short.
LEAN HOGS:
Cutting right to the chase this morning, I’m expecting a higher open in lean hog futures and most likely a sharply higher close. Sometimes a market can totally change its stripes after a three-day weekend. Consider the following bullets.
- Cash was higher yesterday, up $1.00 to $1.50.
- Winter storm activity this week in northern plains, MN and WI.
- The 640-report showed 1039 loads of pork sold for export, a large number.
- Pork cutout yesterday was quoted up $5.63. All pork cuts were quoted higher and led by a surge in belly prices.
- Chinese pig prices are now moving higher. From Friday they’re up 4.8% and year-to-date Chinese pig prices are now up 24%.
- With PEDV and PRRS in the U.S. and ASF in Asia and Europe, global pork production is headed downward.
- U.S. pork is the cheapest pork in the world.
- HPAI (bird flu) has been detected in Brazil for first time ever. Brazil is the world’s largest poultry exporter. This could lead to export bans by China.
Yesterday’s kill was pegged at 482k. The weekly kill is projected to come in at 2.471 million, down about 1% from both last week and last year. There’s a possible head and shoulders bottom formation in Apr pigs. Look for last week’s high, 8780, to be challenged early this week. A close over 8800 is bullish.
LIVE CATTLE:
Brazil had a tough weekend. They’ve detected HPAI for the first time ever in wild birds and they’ve reported an atypical case of BSE. The last time this happened there was some export restrictions on beef put in place by China. This is potentially quite bullish for U.S. cattle prices. In other news, last week’s negotiated volume of trade came in at 76.6k. Asking prices for show list cattle this week are higher (164 and $259) and I expect feedlots to get their asking prices. There were 914 loads of beef sold for export last week, a respectable but not huge number. The on-feed report is due out Friday with the following estimates on the street. On-feed 96%, placements 97% with a range of 95-100 and marketings at 104% with a range of 103-105. The beef was higher yesterday with choice up $1.85 at $282.89 and select up $2.16 at $268.05. Movement was slow at 53 boxes and 19 trim. Trimmings were sharply higher. My meat sources now believe that choice beef is headed toward $300 in quick fashion. Finally, there’s another major winter storm forecast for perhaps half of NE and all of SD and moving into MN, part of IA and into WI. Packers paid higher money last week to get their arms around cattle. Fresh contract highs were scored in Feb and Apr. Look for a higher open and higher close. My upside liquidation target is 16700 in Apr LC futures. We’re working orders to liquidate 156 calls at 1050 and 158 calls at 850. Hold all bullish positions in Oct LC and in feeders.
For a free 30-day trial to the evening livestock wire send an email to; dennis.smith@archerfinancials.com
