<\/p>\n<\/a>Livestock<\/u> –
\nA lot of headlines this morning saying China will now allow US beef imports following a trade deal.\u00a0 I once again do want to point out that China reopened their market to US beef officially a few months ago, it’s just that neither side has agreed on protocols.\u00a0 I suppose this should finally get those protocols through all the proper channels.\u00a0 In exchange for increased beef (and natural gas) exports from the US, the US will allow imports of cooked chicken from China starting in July.<\/p>\n
For the past few days I\u2019ve made some statements suggesting beef prices could be in for a rough ride in the near future.\u00a0 Those statements are looking pretty stupid right now.\u00a0 The cutout continues to move higher, though it still appears volumes are declining.<\/p>\n
However it is worth noting that most of the fireworks in the beef market are coming in 50% lean, while other lean-basis products are acting a bit more rationally.\u00a0 To illustrate, I have a chart here showing the historical price action of 50s and 90s.\u00a0 As you can see, 90s have moved higher here recently but not in spectacular fashion.\u00a0 On the other hand, 50s have hit new record highs for several days now.<\/p>\n
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The problem with 50s could be that with the record basis and inverted board structure, we\u2019re pulling cattle forward and these cattle might be a little more \u201cgreen\u201d (note carcass weights).\u00a0 This might potentially leave a bit less fat trim on each carcass, meaning 50s are in shorter supply than, for example, the 90s.\u00a0 It also probably doesn\u2019t hurt that this is taking place right when we\u2019re looking at a major grilling holiday weekend right around the corner.<\/p>\n
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I suspect the 50s market will calm down before too long and I\u2019m still looking for beef prices in aggregate to stall out here in the near future.\u00a0 That isn\u2019t exactly a bold call, however, as we typically see a seasonal peak in late May.\u00a0 Your guess is as good as mine as to what this will eventually mean for cash and the board.<\/p>\n
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