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Chinese Retail Pork Prices Are at a Three Year High


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MORNING LIVESTOCK REPORT            Friday May 20, 2011

LEAN HOGS

Cash hog prices were sharply higher yesterday as packers are evidently having trouble finding enough slaughter inventory for next week. The cutout was down .98. June futures closed lower and remain well under the cash market. While it's difficult to become accustomed to, the board appears comfortable to trade discount to the cash. The bearish traders are expecting product to break down from current levels after the holiday. A note from the USDA overnight indicated that retail pork prices in China are at three year highs. This was the summer of 2008 which is when the Chinese came in to our pork market is a big way. This resulted in a sharp rally in hog futures, starting around the fourth of July that year. I'm pretty much on the sidelines but with a bullish bias.

LIVE CATTLE

One must assume the funds will be sellers in the live cattle market again today. That's been the trend. June futures continued to collapse yesterday, taking out support in the process. Fund selling has been the feature with open interest declining almost daily. The cash steer trade traded down to $1.08 this week, down a full 4 cents from $1.12. last week. In addition, it appears the show list was not fully moved, suggesting additional cash weakness next week. I'm still spec long in the Dec and Feb but we're running sell stops underneath the market. For now, I see no reason to lift hedges.

If you would like more information about livestock trading, please contact Dennis at 1.877.377.7905 or send an email to dennis.smith@archerfinancials.com.

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.



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About the author


Dennis Smith has been a full service commodity broker specializing in grain and livestock trading for over 25 years. Dennis has a wide range of customers, many of whom are grain and livestock producers. Dennis develops and helps execute hedging and speculative strategies in his Daily Livestock Wire which is prepared each afternoon exclusively for his customers.

Dennis grew up in Central Illinois before launching his brokerage career.

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