Livestock Analysis (VIP) -- July 19, 2013

July 19, 2013 09:41 AM


Price action: Lean hog futures faced light pressure throughout the day and ended 15 to 65 cents lower. Nevertheless, futures posted solid weekly gains.

5-day outlook: Monday's Cold Storage Report is expected to show record-large frozen pork supplies at the end of June. This could weigh on the market to start the week, unless the pork market signals it has put in a near-term low. Prices have been on the decline since the start of the month.

30-day outlook: The cash hog market has also trended to the downside of late. This will likely continue until the product market puts in a low as declining pork prices have pulled packer cutting margins into the red. The hottest days of summer are not usually conducive for pork demand.

90-day outlook: Technically, the lean hog market appears to have posted a seasonal low, but the market could soon face heavier pressure through the fall as market-ready hog supplies build. While hog numbers are not expected to be as heavy as earlier thought, there will be no shortage of supplies.

Hedgers: 50% of expected 3rd-qtr. production is hedged in Aug. lean hog futures at an average price of $97.67 1/2 and 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: Live cattle futures ended the day mostly weaker, but posted little net change for the week. Meanwhile, feeder cattle futures posted slight daily gains and strong gains for the week due to weakness in the corn market and tightening calf supplies.

5-day outlook: This afternoon's Cattle on Feed Report was about as expected. While the Marketing figure came in above trader's guesses, On Feed and Placements were right in line with traders' expectations to give the report a mostly neutral read. As a result, traders' focus will remain on cash fundamentals next week. August live cattle futures ended the week at around a $3 premium to this week's cash cattle trade at steady $119.00 prices.

30-day outlook: Boxed beef prices have dropped nearly $22 from the all-time high posted in late May amid consumer resistance to higher prices. The good news is boxed beef movement picked up this week as prices continued to soften, which should help the market put in a short-term low soon.

90-day outlook: Due to ongoing drought in the Central and Southern Plains, herd rebuilding is not happening in that region of the country, but has begun in areas of the Midwest and Northern Plains, which will continue to result in tightening beef cattle supplies throughout the 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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