Box Beef Sharply lower/ Pork product drifts below 90.00
Sep 10, 2010
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CME Live Cattle
|
CME Feeder Cattle
|
CME Lean Hogs
|
|
Oct
|
97.15
|
+0.25
|
Sept
|
111.70
|
+0.27
|
Oct
|
77.25
|
-0.12
|
|
Dec
|
99.97
|
+0.32
|
Oct
|
111.82
|
+0.07
|
Dec
|
74.70
|
-0.42
|
|
Feb
|
101.32
|
+0.37
|
Nov
|
112.47
|
-0.25
|
Feb
|
78.07
|
-0.42
|
|
|
Index
|
113.71
|
+0.22
|
Index
|
81.85
|
+0.33
|
Live Cattle:
USDA lowers 2010 corn crop yield to 162.5 vs 165.00 July
Midday box beef 160.97 (+0.23) 153.25 (-1.04) 158 lds
USDA COF Friday Sept 17th
Funds long 143,587 contracts as of 9/7/10
Live Cattle: futures settled higher in moderate trade. The trade was force to deal with relatively quiet day, with little new news expected from the beef and live side of the market until mid next week; and the "roll" all but over left futures to one of the narrowest trading ranges seen in a while. Early COF Est. Have on feed numbers 100%-103%, marketing's slightly better than placements. Slaughter rates remain good with this wks up 3.7% over yr ago. actual weights continue to improve however feed yards are believed to be current. In our est. packers are still holding little forward inventory which should lend some support to cash; next wk trade is expected 97.00-95.00; packer margins are positive. This week's live trade volume was good.
Looking Ahead: As we evaluate the Bull vs. Bear sides, we are looking for futures to drift lower and a test of technical support areas. The "bear" arguments have been well publicized but without new information to sustain the bull market steady weak trade is our call leading into the COF report on the 17th. Choice/select spread remains flat. (sub 6.00 ??); and Northern plains are willing sellers. Bull side- Packer will continue to go hand to month, giving the market buying burst. As October approaches, out-front sales maybe our best indication for HRI and retail demand. The trade is expecting higher wholesale prices will be pushed toward the consumer slowing demand...Time will tell. For the balance of this week into next look for Oct and Dec futures to trend lower and retest the 40 day ma (98.00 Dec)
Hedge Recs: take fall production up to 75-80% hedge, look for post labor day break as demand struggles from consumer push back. Look to cover Oct hedges 94.00-95.00 area.
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USDA Boxed Beef Cutout Values
|
|
Choice
|
Select
|
Loads
|
|
159.42
|
-1.31
|
153.25
|
-1.04
|
268
|
|
Choice/Select spread @ 6.17
|
Drop Cr.
|
11.00 (-0.01)
|
|
Slaughter
|
Last wk
|
Yr Ago
|
WTD
|
Yr Ago
|
|
130,000
|
129,000
|
123,000
|
583,000
|
562,000
|
|
|
|
|
|
|
* Prior days quote
Feeder Cattle:
Funds long 9,000 as of 9/7/10
Weekly auctions in the northern plains held a steady to higher tone which lent support to the nearby feeder futures today. Trade volumes are good with most cattle 6 weights or better. USDA est for lower 2010 corn production pressured the differed contracts which posted their lowest close since 8/16. Long Term today's report has set the stage for a very active and interesting corn market. We can emphasize enough the need to have your corn needs covered. We have adjusted our support level to 111.50-112.00 bases Sept.
World feed grain demand is very strong. Continue to keep your feed needs covered.
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USDA Pork Carcass Cutout Values
|
Load vol.
|
|
Cutout
|
89.85
|
-0.40
|
29.50
|
|
Slaughter
|
Wk Ago
|
Yr Ago
|
WTD
|
Yr ago
|
|
415,000
|
401,000
|
428,000
|
1917,000
|
2048,000
|
|
National Live Trade Wtd. Px
|
Net
|
Vol.
|
|
National
|
80.37
|
-1.29
|
17460
|
|
IA/Minn
|
80.84
|
-2.42
|
8555
|
|
W. Cornbelt
|
80.79
|
-2.18
|
10779
|
|
E. Cornbelt
|
79.69
|
-1.20
|
6681
|
|
|
|
|
|
Lean Hogs:
July Pork Exports- Total 96,511.7 dn 9.2% from YA; 106,310.7; 109,396.9 Jun 10
USDA Hogs and Pigs report Friday Sept. 24th.
Funds long 50513 as of 9/7
Packer margins remain well ahead of 5 yr trend @ plus 5-8 /hd.
Lean Hogs- Settled lower off concerns product prices will begin to narrow as total production improves; today's negotiate hog weights posted modest gains. On the week Oct and Dec hogs posted just .05 gain from last Friday. The current discount to cash continues to lend underlining support ; next wk should bring a 2-3.00 shift in the basis. Will supplies improve enough to keep packer bids steady? The market continues to hold the 4.00 range established in June; with the pig crop report in two weeks will we see further production revisions? Light sow slaughter this summer should reflect some improvement in the kept for breeding numbers. Since mid June futures have been within a $4.00 range. Pork product continues under pressure as bellies, hams and ribs drift lower. Seasonally low inventories should lend support to product values as lower trends try to take hold.
Looking Ahead: Long term today's data presents a big issue, has our export clients said enough? possibly. Short term strong packer margins have supported cash prices combined with a strong seasonal trend to narrow the basis next week support futures and time began to run out for the market shorts. One observation I would like to point out. Yesterday we asked what is driving the strong packer margins demand, slaughter capacity or both. Today's export data begins to point toward smaller slaughter capacity. This is important to note, because we have all seen the effects of production out pacing slaughter capacity; A solid marketing plan with risk management is a good Idea. Buy Oct sell Dec @ 1.60, stop close @ 1.10; Exit 3.20
Hedgers don't let profitable opportunities pass bye. Be prepared to sell new contract highs on up to 80% of your Q3 2010 to -Q2 2011 production.World feed grain demand is very strong, continue to keep your feed needs covered.
Please give us a call, become part of an elite ag risk management team.
Best regards,
Paul Nelson
866-433-4371
Toll Free
EHedger
141 West Jackson Blvd.
Suite 1520A
Chicago, IL 60604
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