620,000 head. That was under our 624,000 morning estimate. It is the smallest non-holiday kill of the year. This is a normal seasonal. This run was 2.1% over last year. That is moderately under the +3.3% pace from the previous six weeks. We are not suggesting this week marks any major change in the beef narrative. There are two or three weeks left in the "smallest supply of the year" narrative.
With today's surprising futures rally factored in, the market is implying cash will rebound to $121/$122 later this month. This week's trade was generally $119/$120. Some may ask why this market could rally today? What has changed? 1) We have a three day weekend in front of us. Through Thursday's settlement April fats were down 1.85 for the week. Since 1/22 that contract fell 8.92 through yesterday's close. It's likely we are seeing profit-taking. 2) End users are likely interested here. Choice beef is down 8.51 since 1/22. They were doing some active buying on last week's dip in wholesale beef. They likely are more interested this week.
On the chart side we will respect the fact the market rallied today and held most of those gains into the close. However, we're not ready to suggest its time to fill that 123.07 - 123.35 upside gap on the April.
We don't expect Chinese buying to be a major story for US beef in 2020. Yes, numbers will jump dramatically but you're starting from a low number. China is increasing beef demand but it is a very small market in that country on a per capita basis. Along with Chinese buyers trying to renegotiate prices for Brazilian beef last month, we don't see them using beef as the pork replacement. We are quite optimistic about US exports this year but it is not all China. We see 3.338 billion in exports this year, +10% from last year. US beef exports will remove 12% of US production out of the country. We forecast US imports at 2.980 billion. This is not as bad as it sounds. The US goes from a net exporter to a net importer off and on throughout the years. We see 2020 being a net export market by 358 million lbs. That would be the bet net export in seven years.
We forecast prices for April at $121, June at $114 and August at $108...Rich Nelson
(12/6) Sold $122 June cattle call 2.50, risk to 4.70, objective 0. Closed 0.77.
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