Livestock Analysis (VIP) -- November 1, 2013

November 1, 2013 09:34 AM
 

Hogs

Price action: Hog futures closed moderately low and finishing on their daily lows. December futures closed 82 1/2 cents lower for the day and around $2.00 lower for the week.

5-day outlook: Hog futures and cash prices will likely remain under pressure next week as supplies are on the rise. In addition, traders note wholesale pork prices saw some weakness at week's end and movement has slowed markedly, raising concerns the recent run up in wholesale prices is choking off demand. Technical-minded traders will favor the negative side as chart patterns indicate a major market top has been posted.

30-day outlook: Rising supplies will keep the pressure on cash prices through much of the month. Beef demand will be key. If wholesale beef prices are able to hold their lofty levels, spillover demand to pork will limit declines in hog prices.

90-day outlook: Supplies will decline seasonally once the last of the fall surge in hog numbers passes. Continuing high wholesale beef prices will tend to support pork values and lift prices when the seasonal decline in numbers begins. Traders will monitor reports of the spread of the PEDV virus to gauge how much reduction, if any, in supplies will occur in first-half 2014 marketings. Concerns over the disease's impact on farrowings could support spring futures.

Hedgers: 50% of expected 4th-qtr. production is hedged in Dec. lean hog futures at an average price of $82.12 1/2.

Feed needs: 25% of 4th-qtr. protein needs are covered in long Dec. meal futures at $422.20 and 25% of 1st-qtr. needs are covered in long March meal futures at $410.80.

 

Cattle

Price action: Live cattle futures posted slight to moderate losses to wrap up the week and the market finished slightly below last week's close. Feeder cattle futures saw similar losses today and the market saw steeper losses for the week.

5-day outlook: Active cash cattle trade has yet to get underway, but some light sales have occurred at prices steady with or above the top end of last week's record-setting prices. But action in futures means there is concern about the sustainability of lofty price levels, especially since the boxed beef market softened at week's end.

30-day outlook: With Choice boxed beef values above the $200 per cwt. mark, there is concern retailers may buck high prices as they fear consumers will resist paying such price levels. But the beef market typically gets a lift around the holidays, which could temporarily ease such concerns.

90-day outlook: The cattle market is expected to hit a delayed 10-year cycle high in 2014 as supplies tighten. This could be intensified if the ban on Zilmax sales remains in effect and the country of origin labeling (COOL) rules lead other companies to restrict who they accept cattle from, as was the case with Tyson Foods. It stopped accepting slaughter-ready cattle from Canada due to increased expenses due to the rule in mid-October.

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: 25% of 4th-qtr. protein needs are covered in long Dec. meal futures at $422.20 and 25% of 1st-qtr. needs are covered in long March meal futures at $410.80.

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