February Lean Hogs pulled back towards support at 63.325 early in the week as Chinese jawboning about nothing to see here caused traders to lighten long positions. Traders hadn’t seen the Chinese increasing imports and were worried that maybe they did have control over the African swine fever as they claimed. Show me the imports! Well guess what …. Thursday’s Export Sales report showed China bought 3,300 MT of pork in the week ended November 22nd from the US and 9,400 MT for shipment next year. Futures rallied nearly limit up in the February contract on Thursday in response to the report. This leads me to believe the Chines are extremely worried about the disease’s progression and their inability to control the spread of the disease. They have suffered more than 70 outbreaks and new outbreaks seem to occur on a regular basis. This disease kills the pigs that contract it and there isn’t a cure and a vaccine hasn’t been found to control the disease. Researchers say it could take 10 t0 20 years to find a vaccine for the disease because of its complexity. The jawboning earlier was a sign the Chinese are extremely worried about disease loss going forward, in my opinion. Why drive price higher when you have to go to the market to purchase pork from a trading partner you are in a trade war. Speaking of that situation… the market consolidated today as traders took a back seat in front of the expected Trump/ Xi dinner/ meeting. A positive outcome to the meeting could drive prices higher on Monday. Resistance is at 67.80 in the Feb contract. A break out above 67.80 could see price rally to resistance at 70.125. A negative outcome could see volatility in Hogs and an initial downward push in price. But I think even a negative outcome wouldn’t matter as evidenced by the recent purchases. They will have to come to the US to buy pork if the disease progresses going forward.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Friday, December 6th at 3:00 pm. It is free for anyone who wants to sign up and the link for sign up is below. If you cannot attend live a recording will be sent to your email upon completion of the webinar.
**Call me for a free consultation for a marketing plan regarding your livestock needs.* *
Senior Market Strategist
Walsh Trading, Inc.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.