Livestock Analysis (VIP) -- April 12, 2013

April 12, 2013 09:38 AM


Price action: Lean hog futures saw a choppy day of trade and ended likewise with summer-month contracts favoring the upside. The April contract expired 62 1/2 cents higher at $82.22 1/2. For the week, futures posted slight gains.

5-day outlook: As was the case last year, the seasonal spring grilling rally in hogs has been delayed. A chilly start to spring and slower export demand has weighed on the product market. But if last year is any indication, a seasonal rebound is near. The pork market gave some indications of this the latter half of this week.

30-day outlook: Once the pork market puts in a bottom, the seasonal trend is for it to rally through mid-summer. But until both pork prices and movement improve, upside potential for the cash market will remain limited as packers are cutting in the red.

90-day outlook: The strength of the seasonal rally is up in the air, however, as hog supplies are heavier than year-ago. But the pork market could actually benefit from a weak economic recovery and declining disposable incomes among consumers as pork is cheap relative to beef.

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

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




Price action: Live cattle futures favored the upside most of the day, but this gave way to some late profit-taking in far-deferred contracts. Thus, nearby contracts posted slight gains and deferred contracts slight losses for the day. Feeder cattle future ended 80 cents to $1.30 lower for the day and sharply lower for the week. Live cattle posted moderate losses for the week.

5-day outlook: Nearby contracts benefited from optimism beef demand will soon improve, as grocers featured premium beef cuts in weekly ads. But a forecast for chilly, wet weather next week tempers such expectations. Traders will closely monitor the boxed beef market to see how this plays out.

30-day outlook: Last year, it took sharply lower beef prices to spur strong retailer buying ahead of grilling season. It appears this may be the case again this year. Boxed beef prices are tracking last year's price pattern, but with a lag time of two to three weeks. This could signal a low in the product market may not come until early or mid-May. This, in turn, will likely limit cash market strength, despite tightening supplies.

90-day outlook: Grilling demand should keep the cash and product markets pointed higher this summer. The extent of this rally will be dependent upon how consumers with less disposable income respond to historically high-priced beef.

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.


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