Livestock Analysis (VIP) -- April 26, 2013

April 26, 2013 09:12 AM
 

Hogs

Price action: Lean hog futures enjoyed followthrough buying today and ended at or near session highs with gains of 7 1/2 to 72 1/2 cents. This capped off a week of strong gains for the hog market.

5-day outlook: Confidence is building that the pork market has put in a low and that grilling demand will propel the market higher. This should keep the cash hog market and thus futures pointed higher too -- so long as packer margins remain in the black.

30-day outlook: Export demand concerns have weighed on the market for some time, but domestic demand is expected to pick up some of this slack as cash-strapped consumers may turn to relatively "cheap" pork over beef and even poultry this summer.

90-day outlook: The bird flu situation has resulted in heavy culling of the Chinese poultry flock. Eventually, the nation will need to replenish this source of protein and pork is likely to be the beneficiary of this business. Before China can import U.S. pork, however, the ractopamine issue must be resolved.

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: April live cattle ended 25 cents higher, while deferred months were 22 1/2 to 52 1/2 cents lower today. Cattle futures finished higer for the week amid corrective buying.

5-day outlook: Cash cattle traded $2 higher in the Plains today around $128. Despite the stronger-than-expected cash prices, buying interest was limited and futures remain below the cash market. That's a clear sign traders are sticking with their prove-it attitude.

30-day outlook: Demand remains the primary concern for cattle traders. While demand should improve seasonally as temps warm, beef faces some uphill battles as pork and chicken hold a competitive price advantage. Plus, there are economic concerns, which could limit consumers' willingness to buy beef, especially top-end cuts.

90-day outlook: From a supply standpoint, the cattle market is bullish as feedlot numbers continue to tighten. But based on USDA's latest Cattle on Feed Report, market supplies are likely to be a little heavier than previously expected.

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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