Livestock Analysis (VIP) -- June 14, 2013

June 14, 2013 09:30 AM
 

Hogs

Price action: June lean hog futures expired up 72 1/2 cents at $102.30. The other contracts finished mixed from 62 1/2 cents lower to 12 1/2 cents higher. Hog futures extended the recent price rally this week, but finished well off the weekly highs.

5-day outlook: Next week will tell us whether the late-week pullback was corrective in nature or a sign the market has topped. With summer-month lean hog futures hitting levels earlier this week that have halted previous rally attempts, you should be prepared to hedge a portion of second-half marketings if the market signals the pullback is more than a correction.

30-day outlook: Seasonally, the cash hog market and futures typically peak early to mid-summer as pork production bottoms before embarking on a seasonal rise. That is yet another reason we are closely monitoring the hog market for topping indicators that would be the signal to hedge a portion of second-half hog marketings.

90-day outlook: As hog supplies and pork production start to build seasonally, demand will take on greater importance since storage supplies are already record-large. There are hopes for increased exports to China, but USDA did not increase its pork export forecast this month.

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 were lower for the day and posted moderate losses for the week. Feeder futures were sharply lower today, but for the week were steady to firmer compared to last week's close.

5-day outlook: Bears clearly hold the near-term advantage in the cattle market and it will be difficult for the market to generate much more than short-covering after $2 lower cash cattle trade began in Texas today at $120. While packers' profit margins are in the black, they weren't willing to raise bids due to deterioration in the boxed beef market this week.

30-day outlook: All eyes will be on the beef market next week as Choice values are hovering just above the $200-per-cwt. threshold. Remaining above this level would signal consumers have accepted the beef price increase, but dropping below it would raise expectations the beef market has posted a near-term high.

90-day outlook: USDA lowered its 2013 beef export forecast in this week's Supply & Demand Report and trimmed its cash steer price forecast by $1 on both ends to $125 to $130 for the year. But USDA sees prices rising to a range of $128 to $138 in 2014 as supplies are expected to tighten further.

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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