Cattle Hogs Higher. Is more to come?
Sep 02, 2010
Sept 2, 2010 CME settlements
|
CME Live Cattle
|
CME Feeder Cattle
|
CME Lean Hogs
|
|
Oct
|
98.45
|
+0.70
|
Sept
|
114.75
|
+0.87
|
Oct
|
76.42
|
+1.47
|
|
Dec
|
101.32
|
+0.72
|
Oct
|
115.50
|
+0.65
|
Dec
|
74.15
|
+1.27
|
|
Feb
|
101.85
|
+0.77
|
Nov
|
116.27
|
+1.00
|
Feb
|
76.97
|
+1.05
|
|
|
Index
|
114.12
|
-0.35
|
Index
|
83.01
|
-0.33
|
Live Cattle:
USDA wkly Exports 13, 500 mt (14.1 lw) net sales 11,600mt ; 1900mt canceled (2000 lw)
IA 152.00, 200hd
Midday box beef 162.95 (+0.33) 157.41 (+0.55) 99 lds
Live Cattle:futures settled higher as fresh outside money flow continues, and pre-holiday short covering. Light cash trade in IA was reported at 152.00 We continue to believe the packer will take a wait and see approach following the long weekend, which can increase the volatility if surprises come. The trade is positioned for a well publicized break in demand...What if box beef prices hold on good volume, exports hold +10% of wkly volume. Don't forget forward sales for mid Sept are good. As we mentioned the next few wks will be very exciting .
Looking Ahead:Let's take a look atthe market factors when we return safely from labor day holiday. Bearish events-Oct/Dec roll will be in high gear (asset funds moving longs to Dec contract). It will be mid month without new highs, trend following and manage money will more than likely stay on the sidelines. Choice/select spread continues to erode (sub 6.00 ??); and Northern plains are willing sellers. Bullish- Packer might be a bit short on purchases, out-front sales should keep slaughter good; firming stock market leading into elections. Seasonally exports pop back up; "trade" short and expecting the bearish news. Most important, profitable packers margins. Weekend clearance might just be the tipping point; if packers have to reload to cover better than expected retail demand plus expected out-front and export sales could spark better cash bids.
Hedge Recs: take fall production up to 75-80% hedge, look for post labor day break as demand struggles from consumer push back.
|
USDA Boxed Beef Cutout Values
|
|
Choice
|
Select
|
Loads
|
|
162.91
|
+0.29
|
156.75
|
-0.11
|
168
|
|
Choice/Select spread @ 6.16
|
Drop Cr.
|
10.80 (-0.01)
|
|
Slaughter
|
Wk Ago
|
Yr Ago
|
WTD
|
Yr Ago
|
|
130,000
|
128,000
|
129,000
|
520,000
|
517,000
|
* Prior days quote
Feeder Cattle:
Sept basis adjustment takes hold.
Feeders posted moderate recovery and closed near session highs. Technically minor support levels held. While local auction market are reflective of higher corn prices. USDA quoted El Reno steady 2.00 lower Wednesday. Higher over night corn trade lent early pressure to feeder futures; but by day's end corn was flat on the day allowing pre-holiday short covering to finish things out. We had previously called for 113.00 area to hold Oct feeders...With current corn prices moving higher and counter seasonal this will continue to soften feed yard demand until buyers are confident higher corn prices will support higher differed fed cattle. 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.
|
USDA Pork Carcass Cutout Values
|
Load vol.
|
|
Cutout
|
92.38
|
+1.65
|
72.00
|
|
Slaughter
|
Wk Ago
|
Yr Ago
|
WTD
|
Yr ago
|
|
410,000
|
412,000
|
435,000
|
1631,000
|
1734,000
|
|
National Live Trade Wtd. Px
|
Net
|
Vol.
|
|
National
|
76.94
|
-0.12
|
7040
|
|
IA/Minn
|
76.92
|
-1.10
|
2156
|
|
W. Cornbelt
|
76.92
|
-0.95
|
2890
|
|
E. Cornbelt
|
76.98
|
-0.11
|
3950
|
|
|
|
|
|
Lean Hogs:
USDA Hogs and Pigs report 9/24/10
Midday product quoted hams up slightly
Index expect to remain weak
Lean Hogs- Settled higher and near session highs, pre-holiday short covering was the main feature after early attempts to break futures failed. Active Oct/Dec spreading was also noted. Futures remain poised for lower trade next wk...I guess the real question will be will demand back off enough. This wks weekly Ia/mn posted a marketing yr. low; weights will improve; though futures are expecting this to have started. Since mid June futures have been within a $4.00 range. Pork product bounced lead by Hams and loins, load count has been good all wk.
Looking Ahead: Jumping ahead to Monday night/Tuesday; Bearish concerns- trade will expect the index to drift lower, Mid month may limited over all buy side interest; moderate expansion is expect in the Sept pig crop report off better producer profitability. Bullish factors-Futures are technically over-sold. pork product holds; production slow to recover due to late summer heat. Export demand improves due to world production problems.
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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