Livestock Analysis -- Advice (VIP) -- June 21, 2013

June 21, 2013 09:42 AM
 

Hogs

Advice: We advised hedges covering 25% of expected 3rd-qtr. production in Aug. lean hog futures and 25% of expected 4th-qtr. production in Dec. lean hog futures this morning. Our fills were $97.20 in Aug. hogs and $81.75 in Dec. hogs.

Price action: Lean hog futures rebounded to close narrowly mixed and high-range in most contracts today. Futures extended their price rally this week, but ended well below the weekly highs in summer-month contracts.

5-day outlook: Hog futures flashed signs of topping action this week, which was enough to encourage us to hedge a portion of second-half production. If a top is confirmed, we'll add to hedge coverage as current prices are attractive. But based on today's close, the market may make one more push to the upside next week.

30-day outlook: Seasonally, cash hog bids, pork product prices and lean hog futures should top by mid-summer as hog/pork production bottoms and then begins to build into year-end. Demand will become a greater focus as production starts to build, especially given hefty pork supplies in frozen storage.

90-day outlook: Porcine epidemic diarrhea virus (PEDV) means there will be fewer market hogs down the road. But it's being factored into prices now, meaning it won't be a bullish surprise later when slaughter numbers aren't as big as anticipated.

Hedgers: NEW ADVICE: Hedge 25% of expected 3rd-qtr. production in Aug. lean hog futures and 25% of expected 4th-qtr. production in Dec. lean hog futures. Our fills were $97.20 in Aug. hogs and $81.75 in Dec. hogs.

Feed needs: All feed coverage has been lifted. Carry all risk in the cash market for now.

 

Cattle

Price action: Live and feeder cattle futures posted strong daily gains to end the week higher. Futures were supported by short-covering and position squaring as traders prepared for what they expected to be a bullish Cattle on Feed Report.

5-day outlook: This afternoon's Cattle on Feed Report is getting a slightly negative read as it showed total cattle on feed above expectations, but the Cold Storage Report reflected a tightening supply situation and better-than-expected demand. The bigger-than-expected drawdown in beef supplies should offset the negative read on the COF Report and could help to support futures early next week. All eyes will be on the boxed beef market, especially after Choice values slipped this week.

30-day outlook: Given the slow economic recovery, traders remain concerned boxed beef prices will continue to soften, as the market typically puts in a seasonal high around this time. To build bullish enthusiasm in live cattle futures, traders need confirmation that consumers have accepted an increase in beef prices with stability in boxed beef movement.

90-day outlook: Given the strong hold drought has on the Central and Southern Plains, cow slaughter has run above year-ago levels so far this year, further trimming the beef-cow factory. Until pasture conditions in the region improve, producers will be hesitant to hold back replacement heifers. But once this process begins, cattle supplies will tighten dramatically, leading to what should be a major move into the 10-year cattle cycle high.

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, but feeder cattle buyers should stay in touch to establish long coverage.

Feed needs: All feed coverage has been lifted. Carry all risk in the cash market for now.

Back to news


Comments

 
Spell Check

No comments have been posted to this News Article

Corn College TV Education Series

2014_Team_Shot_with_Logo

Get nearly 8 hours of educational video with Farm Journal's top agronomists. Produced in the field and neatly organized by topic, from spring prep to post-harvest. Order now!

Markets

Market Data provided by QTInfo.com
Brought to you by Beyer
Close