Livestock Analysis (VIP) -- April 5, 2013

April 5, 2013 09:45 AM
 

Hogs

Price action: Lean hog futures finished sharply lower in all but some of the far-deferred contracts, which posted lesser losses. That locked in losses for the week.

5-day outlook: Today's sharp losses were technically damaging, as the uptrend from the March lows is no longer intact. That could inspire some technical-based selling next week. Fundamentally, cash hog bids are expected to remain steady to firmer, though cash strength may fade if the pork product market doesn't strengthen as packer margins are tight.

30-day outlook: Disappointing employment data agitates concerns about pork demand. While pork holds a competitive price advantage over beef, the sluggish jobs market suggests all red meat demand may struggle in the months ahead.

90-day outlook: Seasonally, market-ready hog supplies should continue to tighten into mid-summer. But USDA's Hogs & Pigs Report signals slaughter numbers will run slightly above year-ago. Given abundant pork in frozen storage, the onus is on demand to chew through the excess supplies.

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 finished 65 cents to $1.22 1/2 lower today and sharply lower for the week.

5-day outlook: The low-range close for the week in cattle futures sets the stage for followthrough selling next week. The discount nearby futures hold to the cash market should limit selling pressure, but this could be a case where futures dictate cash trade. In that case, there wouldn't be a reason for traders to cover short positions.

30-day outlook: Seasonally, beef demand should improve as grilling season kicks off. But beef has several strikes against it this year. Beef prices are high compared to pork and poultry and a sluggish jobs market may curb consumer demand for top-end beef cuts. Plus, retailers may be concerned of getting stuck with high-priced inventory.

90-day outlook: While demand is a concern, the supply side of the market is bullish. That should limit downside risk. But it won't be a highly price-supportive factor until demand concerns ease.

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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