China And The US Moving Toward Common Ground

By Dennis Smith

Follow me on Twitter @denniscattle

Thursday September 12, 2019

LEAN HOGS:

The U.S. government and China are both moving closer to common ground, perhaps were approaching some kind of cease fire, some kind of tariff rollback. The issues are extremely thorny, extremely complicated. A resolution early next month is extremely unlikely but some sort of pause in the despite appears highly likely. Export sales were solid at 21,900 MT with China the biggest buyer, booking 10,900 MT. Our other traditional buyers were small buyers with total sales up 3% from the 4-week average. Shipments were 20,900, actually down 17% from the 4-week average. China only shipped 5,100 MT last week. With record large production coming down the pipe, this is a bit of a problem. Futures are bid sharply higher. Many are quick to call this a major bottom. Perhaps. However, consider a sharply higher early trade a hedging opportunity for Oct and Dec production. As for next year, were leaving all production unhedged as its rather obvious that Asia is going to need massive amounts of U.S. pork eventually. Cash will be called lower.

LIVE CATTLE:

Weekly beef export sales would have been nearly non-existent had Hong Kong not purchased 11,100 MT last week. Total sales, at 18,000 MT were thus up 11% from the 4-week average. Shipments at 14,600 were down 7% from the 4-week average. The volume of direct steer trade remains very light this week, starting out very low at 97 cents and firming up to 99 cents with some $1.00 trade in NE and some $1.02 in IA. Please note that all the cash transactions are lower than last week. Choice beef was down $5.49. Futures volume was large yesterday at 127,300 with open interest up 1,800. Cattle may get some traction from a sharply higher early trade in hogs, but look for selling, aggressive selling to likely develop at some point during the first hour of trade. IMO its extremely unlikely that packers are going to have to chase to secure inventory in the weeks ahead.

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