Price action: Lean hog futures closed 60 cents lower to 25 cents higher today. Most contracts finished higher for the week.
5-day outlook: Inclement weather supported lean hog futures and the cash market this week. Conditions are expected to be improved next week, which could weigh on the cash market given that packer margins are deep in the red. If the cash market softens, it will be hard for futures to avoid price pressure.
30-day outlook: Key to avoiding a major downturn in prices is the pork product market. Packers must see pork prices strengthen enough to push margins back near breakeven or the cash market will be under pressure and some plants may opt to reduce kill runs.
90-day outlook: Seasonally, pork production will decline into early summer as slaughter numbers drop. Traders have seasonal strength due to declining supplies built into spring- and summer-month futures, meaning added price support must come from the demand side. High beef prices should help pork demand.
Hedgers: Carry all risk in the cash market for now.
Feed needs: 25% of 1st-qtr. corn needs are covered in long March corn futures at $6.87 and 25% of 2nd-qtr. corn needs are covered in long July corn futures at $6.78 3/4. 25% of 1st-qtr. protein needs are covered in long March soybean meal futures at $395.30 and 25% of 2nd-qtr. protein needs are covered in long July soybean meal futures at $388.00.
Price action: Cattle futures still posted gains for the week, but today's losses trimmed those price gains.
5-day outlook: Traders should view this afternoon's Cattle Inventory Report as bullish as it shows all cattle and calves slightly below expectations at 98% of year-ago levels and the annual calf crop at 97% of year-ago, which was around a percentage point below expectations.
30-day outlook: News Japan has finalized its rule to import beef from animals under 30-months of age raises expectations the country's demand for U.S. beef will rise steadily this year. But sources say it could take some time to fully implement the rule and for Japanese buyers to clear their current beef stocks before they increase their purchases of U.S. beef. The U.S. Meat Export Federation expects Japanese purchases of U.S. to increase by 45% from last year's levels.
90-day outlook: Most surprising from the Cattle Inventory Report was indication that producers -- even in Texas -- have begun retaining heifers, as beef replacement heifers came in two percentage points above year-ago levels. This signals the cattle cycle high should remain in place for 2013, as these animals will be placed on pasture to trim total beef production.
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: 25% of 1st-qtr. corn needs are covered in long March corn futures at $6.87 and 25% of 2nd-qtr. Corn needs are covered in long July corn futures at $6.78 3/4. 25% of 1st-qtr. protein needs are covered in long March soybean meal futures at $395.30 and 25% of 2nd-qtr. Protein needs are covered in long July soybean meal futures at $388.00.