China Stepping Into The U.S. Pork Market

by Archer Financial Services | Mar 26, 2019

by Dennis Smith
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Cash is called higher, perhaps up $2.00 for today. Yesterday’s cash was up mostly $2.00 to $2.50. The pork cutout is now priced above $80.00. Impressive stuff. Futures staged a second day of correction in the wake of Friday’s huge wave of selling off the contact highs. Today should mark the end of the correction. The cat is finally out of the bag. Reports today are confirming that China is committed to import a huge amount of U.S. pork this year. The numbers are staggering with 300,000 MT being discussed. This would be an increase of 80% compared to what they imported in 2017, or the pre-tariff trade. The spin on the story is that it’s a direct effort to solve the trade war. This is pure B.S. (pardon my French) they’re buying this amount of pork because they NEED THE PORK. China will only buy what they need. (By the way they don’t need soybeans). I actually expect they will likely import more than this quantity. In addition, keep in mind they’re likely forging similar agreements with the EU. In other works, the world price is pork (and beef too for that matter) is going higher. Look for the rally in lean hog futures to resume today.


LC futures volume on the break was 90,000 with open interest down by 3,300. The decline was in the April contract. I’m actually expecting a fully steady to possibly higher cash steer trade later this week. Futures may start out lower but I’d look for the aggressive selling to dry up today. Anyone who thinks the charts are bearish might want to take a second look. Look for wholesale beef to firm up as the weather improves. The strong spring time demand has not surfaced yet but it’s not far away. The bullish to extremely bullish situation in the pork complex will support beef prices over the next 30 to 60 days, in my opinion. My guess is LC futures will start out lower and finish well off the lows.

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