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Nov. 19, 2018

Friday, Nov. 16, the first three months of lean hogs closed up the limit, driven by the news that the largest hog-producing province in China had found a case of African swine fever.

A dead wild boar was also found with African swine fever in China. It is estimated that there are 30 million feral hogs in China. If this is true, stopping swine fever there may be a pretty tough nut to crack.

Open interest did not increase in the lean hog futures, which means that this was short covering. In order to see hogs start rising, we will need to see continued buying.

Cattle were traded last week between $176-$178 and $113-$114.50 standing. This week will be a short slaughter week because of Thanksgiving. In the Midwest, we are still seeing heavy cattle. The packers climbed on top of these heavy cattle and are purchasing them substantially lower than where the cattle are trading.

Over in the grain market, as we come to the end of harvest, we are experiencing a “dead in the water” type of market caught in a trading range with no news to spur it higher. The farmer continues to hold on tightly to grain. This will work until money is needed to pay bills and living expenses.

We need to keep current on livestock marketing and devise a plan on how we are going to achieve cash flow in this grain market. What concerns me most is that if the tariffs were a short-term situation, we would not have put much of a wrinkle in this grain market. But they have persisted, and now we have a market which has a tremendous carryover and not many exports — especially in the bean market.

My feeling is that if we do have a settlement, it could very well be a “buy the rumor, sell the news” type of deal. We need to be on guard for this type of situation.

I got into the commodity brokerage business in 1974, and since the Russian grain trade in 1973, we have worked tirelessly to increase sales of grain and meat to areas overseas. This has created an agricultural economy which through technology has increased production of both meat and grain each year.

During this entire time we have never had a market where we have controlled what we have tried to sell, except during the 1970s and President Nixon’s freeze on beef or President Carter with his bean embargo. Neither action lasted very long, but they were both failures and detrimental to price.

My point here is I don’t know how to work (from either a broker side or as a farmer/marketer) with a market that has limits on it. If we can’t have a steady flow of product, the alternative is some type of government subsidy to pay the American grain and livestock producer to make up for the lost income.

It took us 50 years to get away from that type of program. In four short months, we are back there again. I am not here to tell anyone what to produce, but I think there are alternatives in production such as oats, hay, and possibly cattle on corn stalks. I am aware there are few fences anymore, but an electric fence can be put up to utilize corn stalks. One also needs some type of corral to get the cattle acclimated to both the area and the electric fence.

My philosophy is that a cow will produce a calf every year; a new tractor only produces a payment every year.

Good luck and good marketing.


This weekly report is for informational purposes only and is not to be construed as an offer to sell or a solicitation to buy the commodities listed herein.