Livestock Analysis (VIP) -- June 7, 2013

June 7, 2013 09:30 AM


Price action: Lean hog futures turned in another strong performance this week, ending 37 1/2 to 82 1/2 cents higher today and on or near weekly highs.

5-day outlook: The cash hog market softened a little in some locations this week as packers focused on trying to improve margins. But with market-ready supplies tightening, widespread pressure on the cash market is not likely unless the pork cutout value tumbles. With the technical picture strengthening, the downside is limited to corrective selling in lean hog futures unless fundamentals weaken.

30-day outlook: With BLT season ahead and bacon features on many restaurant menus, belly prices should be well supported. But if belly prices would soften, there is downside risk in the pork market as bellies have been largely supporting the cutout value recently.

90-day outlook: Seasonally, hog numbers will start to build by the end of this period. As supplies build, demand will be in greater focus, especially domestic demand, given expectations for weaker exports and hefty frozen stocks.

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.




Price action: Live cattle futures finished 27 1/2 to 80 cents lower today. Futures posted losses for the week and finished near weekly lows.

5-day outlook: Cattle futures are being pressured by the fall in boxed beef prices from recent all-time highs despite the discount they hold to the cash market. Traders' willingness to keep futures well below the cash market signals attitudes remain bearish. As a result, the upside is limited to mild corrective buying.

30-day outlook: Beef demand through the summer grilling season is going to be critical to price action. Domestic and export beef sales must be strong through the summer to ease demand concerns. Unfortunately, consumers may be more interested in putting hamburgers than steak on the grill this summer given high beef prices.

90-day outlook: The heavy placement of heavyweight calves on feed this spring suggests market cattle numbers may be heavier than previously anticipated by fall and winter. That would put even more pressure on demand even though cattle numbers are historically tight.

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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