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Tuesday February 12, 2019
Possible bottom in lean hog futures was scored yesterday. The outside day higher close occurred on volume of nearly 54,000 with open interest rising by an impressive 5,200 cars. With the exception of the soon to expire Feb, OI was higher in every hog contract. The largest increase was in the Oct hogs, jumping by 1,700 contracts. Oct also scored an outside day higher close. Technically it takes a close well above 7800 in the June to confirm a bottom.
Cash is called steady to lower despite difficult road conditions. Producers are current, this should not develop into a long term problem. This marks the third consecutive week that slaughter has been disrupted due to winter conditions. What we’ve not seen yet is some spark in the product. Where or where is demand for pork? There’s optimism toward a trade agreement with Trump advisors stating that the President “wants a deal”. The removal of the Chinese tariff on U.S. pork would really spark the market should this occur. This week’s kill is projected to be 2.512 million, or about 5% larger than last year. Last week futures rallied sharply on Monday and then proceeded to fall apart. Will this week display a far different pattern?
There were 50 new deliveries posted yesterday against the Feb LC contract. The stopper continues to take all certificates with the oldest long holding at June 21st. LC closed higher on volume of 56,500 with open interest up 1,885. We suspect futures will pull back today but we’re not willing to bet on this. In other words, we’re looking for a way to cover some shorts. The weekly kill is projected to come in at 609,000. Last week’s harvest was large at 620,000. The beef was strong. It is amazing how strong beef demand is compared to how weak pork demand has been. There’s a seasonal low due late this week or early next week.
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