Livestock Analysis (VIP) -- April 19, 2013

April 19, 2013 09:35 AM
 

Hogs

Price action: Lean hog futures finished 10 to 60 cents lower in most contracts today. Spring- and summer-month contracts ended slightly higher for the week, while fall- and winter-month contracts posted modest weekly losses.

5-day outlook: Packer demand for cash hogs is expected to improve next week as margins are profitable and market-ready supplies are tightening. An expected firming of cash hog bids may not provide much support to futures, however, as they already hold a premium to the cash market. But a firmer cash market would limit downside risk.

30-day outlook: Pork demand should improve as temps warm and the grilling season starts. Typically, retailers like to feature beef, but pork has a strong competitive price advantage, which could lead to more pork features this year.

90-day outlook: Seasonally, the cash hog market and lean hog futures should firm into mid-summer as market-ready hog supplies tighten and pork production eases. For the market to repeat the strong seasonal rally seen the past two years, demand must be solid.

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.

Cattle

Price action: Live cattle futures ended the day weaker in all but the front-month contract, and nearby contracts posted slight gains for the week. Meanwhile, feeder cattle posted sharp losses for the week.

5-day outlook: This afternoon's Cattle on Feed Report will weigh on live cattle futures early next week, as the report showed more cattle on feed than expected. At 95% of year-ago, total feedlot numbers were propelled higher by much-higher-than-expected Placements at 106% of year-ago levels.

30-day outlook: With focus on demand, traders are watching for signs that retailers have begun buying for summer grilling features. So far cooler-than-usual temps across most of the country have kept retailers from aggressively buying beef. High beef prices, however, will limit demand this summer, especially since pork and poultry prices are more competitive.

90-day outlook: The drought in the Central and Southern Plains is expected to linger into the summer, which doesn't bode well for heifer retention. That sharp tightening of supplies is needed to push prices to a 10-year cycle high. But tight supplies will limit downside risk.

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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