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Balanced 2012 pork demand

Soybeans closed near the session highs Thursday and could be targeting 1200 over the next few sessions. The dollar gave confidence to the bulls and helped push commodities higher. 

One of the main focuses Thursday was export sales. China bought another 110,000 tonnes of beans this morning and the trade is expecting to see good weekly sales tomorrow. This is the first purchase from China of new crop in 2012. 

USDA will be releasing weekly export number at 7:30 tomorrow due to the shortened week. The trade is expecting to see between 550,000 and 750,000 tonnes sold. South American weather continues to keep moister in the forecast but I think the market wants to see the rain before the price will react. We are approaching the $12.00 mark and could be a good selling opportunity for producers if you need to sell old crop beans. We will be looking at rallies to sell as we move into the weekend. March beans are up 36 ¾ cents for the week so far with the funds continuing to extend their long positions. They bought 5,000 contracts and have increased their positions by 13,000 for the week so far.

China had passed USDA’s projection for old crop beans and this is the first purchase for 2012. We usually start to decline in sales from here on out. USDA expects to see bigger sales this year than last.

Trade Recommendation:

(01/19) Sell March Beans 1220, risk 1250, objective 1180.

Hog Outlook

The year of 2012 should be a pretty balanced one for supply and demand in pork. Looking at Allendale’s pork supply forecast, we see a 1.5% increase is expected over last year. On the other hand, a slight bump up in export demand may help balance the amount US consumers see. The one question mark in hog pricing this year will be how the deficit in meat production from chicken and beef affects our pork pricing…Rich Nelson


Working Trade:

(12/21) Bought 1 Feb lean hog future and sold 1 Feb 87.00 call, exited whole position on (1/19) open. Futures bought at 83.50 and exited at 86.45. Call sold for 1.20 and exited at 0.87. Profit on complete position +3.27 for +$1,310.



Written by Rich Nelson 

Director of Research
Allendale Inc.
4506 Prime Parkway
McHenry, IL 60050

Hypothetical performance results have many inherent limitations, some of which are described below.  No representation is being made that any account will achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.  One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight.  In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading.  For example, the ability to withstand losses or adhere to a particular trading program in spite of trading losses are material points which can adversely affect actual trading results.  There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

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