Livestock –
By now you’ve likely heard China has lifted its ban on Brazilian meat products. The devil is in the details, however. While the straight ban on Brazilian imports is lifted China is still not allowing meat from 21 plants still under investigation. So yes, while this is certainly a good restart for Brazil there are still some hurdles to clear. Note China (and Hong Kong) are the biggest export market for Brazilian beef. Restrictions have been lifted by Chile and Egypt as well, both with similar restrictions on the specific plants.
This good news for Brazil probably will have a greater market impact than Friday’s Cattle on Feed report. The headline figures came out pretty much as expected and looking at the numbers again this morning I’m finding it difficult find something of substance to point out. One could make an argument that we’re pulling ahead cattle right now at these current kill rates, but one might also argue packers are going to have a hard time finding a home for all this beef in the near future. Spot boxes have rolled over here and it’ll be interesting to see how far they fall. Packer margins have been pretty stout, supporting the strong kill rates. We’ll see how long this continues.
Friday’s COT numbers are a bit interesting. The MM position in cattle is not a record large, but it is certainly “elevated” and you can see the surge in just the past week. How much of that might be due to the Brazilian storyline? How much is LC-LH spreading? Again, while not a record this is still a massive spec position that we need to watch carefully.
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