By Dennis Smith | Archer Financial Services Broker
Volume yesterday was moderate at 56,300 with open interest rising by 5,200. The funds are getting short, the small trader is already short and the commercials are nearly flat. Trump continues to do what he does best….keep everyone off balance. His comments out of Europe indicate he’s content to wait until after the election to strike a phase one trade deal. I’m not sure anyone actually believes that. Doesn’t matter, China is buying U.S. pork and they’ll continue buying U.S. pork. Look for waivers to come into play any moment now as shipments accelerate. The Chinese Vice Premier has stated a stable pork market is extremely important going into the Chinese New Year holidays. Massive imports. EU pork exports continue to soar. EU Sep pork exports rose by 37% compared to U.S. Sep pork exports which increased by 7.5%. However, without a tariff or with a waiver, U.S. pork is incredibly cheap. Frankly, I’m not sure what to expect out of futures today. We’re bull spread in the Feb/Apr and we bought Feb 78 calls yesterday. Cash was higher on Monday in the face of a weekly kill projected to be record large at 2.763 million pigs. Cash is called steady to higher again today. Yesterday the cutout was up $1.01.
LC futures volume yesterday was 53,300 with open interest rising by 1,900. Futures closed lower for the second consecutive session but the pullback has been extremely shallow and certainly not causing any technical damage so far. Projections on the weekly kill vary widely this week from 655,000 to 670,000. Certainly packer processing margins are highly profitable. It’s possible that LC could be sensitive to the stock market if it starts dropping with the funds holding a sizable long position. Most in the trade are expecting another round of cash strength this week with the show list smaller. Today is the third day down, let’s see what happens.
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