Hogs higher- basis expect to narrow
Sep 09, 2010
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CME Live Cattle
|
CME Feeder Cattle
|
CME Lean Hogs
|
|
Oct
|
96.90
|
-0.35
|
Sept
|
111.42
|
-0.67
|
Oct
|
77.37
|
+1.07
|
|
Dec
|
99.65
|
-0.05
|
Oct
|
111.75
|
-0.67
|
Dec
|
75.12
|
+0.87
|
|
Feb
|
100.95
|
-0.17
|
Nov
|
112.72
|
-0.70
|
Feb
|
78.50
|
+0.65
|
|
|
Index
|
113.49
|
-0.18
|
Index
|
81.53
|
+0.09
|
Live Cattle:
July Beef Exports- Total 65,221 up 26.1%; 51,715.4 July 09; 64923.6 June 10 reported by U.S. Census Bureau
Drop Credit 11.01; NEW HIGH
Midday box beef 160.86 (-0.61) 154.51 (-0.93) 166 lds
Friday- 7:30 am Monthly Supply and Demand USDA report
USDA COF Friday Sept 17th
Live Cattle: futures settled lower after yesterday's better cash trade. July export figures confirmed solid weekly reports. Early COF Est. have August Marketing's 2-4 % above placement; Keep in mind overall available feeder number are smaller. As we finish out the week; the cattle bull is looking to be feed...the export story remains good; but no longer new; cash traded steady to 2.00 higher but is asking "what can we do next week?" Retail and HRI have started feeling the effects of plus 160 cut-out. So without the influence of new "bull" fundamentals futures will look to the technical story for the next move. The trade is positioned for a well publicized break in demand.
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.
|
USDA Boxed Beef Cutout Values
|
|
Choice
|
Select
|
Loads
|
|
160.47
|
-0.74
|
154.29
|
-1.15
|
272
|
|
Choice/Select spread @ 6.44
|
Drop Cr.
|
11.01 (+0.04)
|
|
Slaughter
|
Wk Ago
|
Yr Ago
|
WTD
|
Yr Ago
|
|
131,000
|
130,000
|
130,000
|
396,000
|
392,000
|
|
|
|
|
|
|
* Prior days quote
World feed grain demand is very strong. Continue to keep your feed needs covered.
|
USDA Pork Carcass Cutout Values
|
Load vol.
|
|
Cutout
|
90.25
|
-0.69
|
91.75
|
|
Slaughter
|
Wk Ago
|
Yr Ago
|
WTD
|
Yr ago
|
|
424,000
|
405,000
|
432,000
|
1259,000
|
1300,000
|
|
National Live Trade Wtd. Px
|
Net
|
Vol.
|
|
National
|
81.80
|
+1.94
|
10250
|
|
IA/Minn
|
83.20
|
+2.85
|
5306
|
|
W. Cornbelt
|
82.79
|
+2.62
|
6253
|
|
E. Cornbelt
|
78.49
|
-0.66
|
3597
|
|
|
|
|
|
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.
Packer margins remain well ahead of 5 yr trend @ plus 5-8 /hd.
Lean Hogs- Settled higher off professional short coving. Once the trade realized today's extremely bearish July export data was not going to effect the index; the 5.00 discount to cash was too much for futures to break. Historically the basis will begin to narrow next week but until it comes in to -2.00 to -3.00 it will be tough to break futures. Add in strong packer margins to support nearby negotiated trade and futures have to adjust. Since mid June futures have been within a $4.00 range. Pork product remains under pressure off the "summer cuts". Low inventories should lend support to product values as seasonally 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; this is why 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
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold EHedger, Paul Nelson harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.
