Livestock Analysis (VIP) -- August 30, 2013

August 30, 2013 09:26 AM


Price action: Lean hog futures enjoyed light short-covering today and ended steady to 45 cents higher for the day and with strong gains for the week.

5-day outlook: A mixed cash hog market resulted from scorching Midwest heat that limited hog weight gains and slowed transportation. Supplies and processing typically rise after Labor Day, but expectations for more heat in the western Corn Belt next week could disrupt this seasonal tendency.

30-day outlook: Cash hog and pork markets usually hit a seasonal low in September and then rally into the month of October as fall grilling gives the market a boost. Also influencing price action will be the Sept. 27 Quarterly Hogs & Pigs Report that will give the market a better idea of how feed supply prospects are influencing expansion plans. A major shift in profit forecasts was seen this week.

90-day outlook: Hog supplies will build as weight gains increase as temps cool. This will limit the market's upside except during holiday buying weeks.

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



Price action: August live cattle expired 85 cents lower today, with the rest of the market narrowly mixed to end slightly higher compared to last week's close. Feeder futures ended the week lower compared to last week's close. Focus to end the week was on end-of-the-month position squaring.

5-day outlook: While market-ready supplies continue to tighten, traders remain concerned about demand. The inability of live cattle to rally on a bullish Cattle on Feed Report this week is a strong reminder of demand destruction. Light cash cattle trade was underway this morning in the Southern Plains at $123, which is steady with last week. That sets the stage for more choppy price action in futures to begin next week.

30-day outlook: Labor Day marks the end of the grilling season, which raises concerns about beef demand. Exports remain strong, but could soften if the U.S. dollar index continues to improve. Packer demand will remain key for this period, as cash cattle bids haven't seen much movement the last month.

90-day outlook: Further tightening of market-ready supplies suggests some producers are holding heifers out of the slaughter mix. If realized, this will help to propel cattle futures into a 10-year cycle high, which is due this year.

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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