by Dennis Smith
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The early call on cash hogs is steady to possibly slightly lower. Myself, I’m expecting a higher cash market at the end of the day. Why? Because we appear to be missing hogs and I’ve not found any one that can explain the discrepancy. The weekly kill since early Sep is running nearly 2% below last year. The hog & pig report indicated supplies of butchers during this period should be up 3.5%. It appears hogs were pulled ahead both before and after hurricane Florence. Now, on the backside of the hurricane, where are the hogs? Hogs that were backed up by Smithfield and why are we now running, for two consecutive weeks, a hog kill lower than last year? Look for futures to move higher as this get sorted out. China admitted today that the ASF outbreak remains complex and severe and prevention and control efforts are in a pivotal period. Three new cases were reported yesterday. Seaboard/Triumph is starting their second shift, killing a few pigs to get workers accustomed. They’ll slowly expand the kill. Based upon the bullish chart pattern and based upon the short fall in hogs I’d look for a higher performance today.
The CME reports three deliveries against the Oct LC although I’ve not seen exactly where the deliveries were posted. The oldest long is partly through April 19th. This should bring some selling into the Oct contract today. If you don’t want to get hit with a delivery notice, better step out of this market. The show list is smaller this week. Beef continues to slide into new recent lows. Packer margins remain profitable. The cash steer market has been sideways to slightly higher for four consecutive weeks. Futures continue to hold a substantial premium to the cash. We are long puts against the Dec for hedges and we have hedges in place mostly through three way risk reversals in the Feb and Apr. We’ve also been establishing hedges in the Jan feeders for the last two sessions. Monthly export data for August will be released later today. We’ll report on this in our midday pork and beef update.
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