Livestock Analysis -- Advice (VIP) -- January 11, 2013

January 11, 2013 08:50 AM
 

Hogs

Advice: Livestock producers were advised ahead of this morning's USDA reports to cover 25% of expected first-half corn-for-feed and protein needs in long corn and soymeal futures.

Price action: Lean hog futures ended the day mixed, but posted sharp losses for the week. April lean hog futures have dropped below the November low to suggest the contract has posted a near-term high.

5-day outlook: Followthrough pressure early next week would open more near-term downside risk for lean hog futures, especially if the cash hog market continues to soften. February lean hog futures are now trading in line with the cash market, as traders took the cash premium out this week due to slackened packer demand.

30-day outlook: As expected, USDA raised its 2013 pork production projections in this morning's S&D Report to reflect larger-than-expected inventory from the latest Quarterly Hogs & Pigs Report. USDA also raised its 2012 production estimate, which resulted in just a marginal year-over-year projected increase for 2013.

90-day outlook: USDA has a bright outlook for pork exports this year, as it raised its forecast by 40 million lbs. from last month to now be down just marginally for the record-setting pace in 2012. Given tight supplies of competing meats, pork prices will remain supported this year.

Hedgers: Carry all risk in the cash market for now.

Feed needs: NEW ADVICE: 25% of 1st-qtr. corn needs are covered in long March corn futures at $6.87 and 25% of 2nd-qtr. corn needs are covered in long July corn futures at $6.78 3/4. 25% of 1st-qtr. protein needs are covered in long March soybean meal futures at $395.30 and 25% of 2nd-qtr. protein needs are covered in long July soybean meal futures at $388.00.

 

 

Cattle

Advice: Livestock producers were advised ahead of this morning's USDA reports to cover 25% of expected first-half corn-for-feed and protein needs in long corn and soymeal futures.

Price action: Live and feeder cattle futures faced stepped-up profit-taking pressure today to propel the market to sharp losses for the week.

5-day outlook: February live cattle are still trading at a premium to this week's $126 to $128 cash cattle trade, which raises the risk of followthrough pressure next week. Ultimately, downside risk should be limited for the cash market and futures as market-ready supplies are tight. But indications are that feedlots did not get lots current again this week, which once again weakens their bargaining power for next week's cash negotiations.

30-day outlook: All eyes will remain on the boxed beef market as it's at levels that have slowed demand in the past. However, as supplies have tightened year-to-year, Choice beef values turned the previous year's resistance into support. As long as the U.S. economy shows signs of improving and there's no other threat to demand, the $200 level should eventually turn into support for Choice boxed beef.

90-day outlook: USDA raised its 2013 beef production projection by 220 million lbs. to primarily reflect heavier-than-normal carcass weights. Dressed cattle weights are currently 22 lbs. heavier than year-ago to slightly offset tighter supplies. USDA sees cash steer prices rising throughout the year and averaging $125 to $134 in 2013.

Hedgers: Fed cattle producers should carry all risk in the cash market for now. Feeder cattle sellers and buyers should also carry all risk in the cash market for now.

Feed needs: NEW ADVICE: 25% of 1st-qtr. corn needs are covered in long March corn futures at $6.87 and 25% of 2nd-qtr. corn needs are covered in long July corn futures at $6.78 3/4. 25% of 1st-qtr. protein needs are covered in long March soybean meal futures at $395.30 and 25% of 2nd-qtr. protein needs are covered in long July soybean meal futures at $388.00.

 

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