Livestock analysis (VIP) -- March 15, 2013

March 15, 2013 09:51 AM
 

Hogs

Price action: Lean hogs ended 60 cents to $1.30 lower today and sharply lower for the week.

5-day outlook: Lean hog futures are struggling to put in a low amid weakness in the cash hog market and persistent demand concerns. Unless those pressures unexpectedly ease next week, the upside will remain limited to corrective short-covering.

30-day outlook: Easter ham buying is just about wrapped up, but grilling season is just around the corner. Given historically high beef prices, retailers may feature more pork this spring as consumers are likely to be value buyers given the still-sluggish economy.

90-day outlook: Seasonally, cash hog bid and lean hog futures should firm into summer as pork production slows. If demand concerns linger, however, it could keep the market from realizing a "normal" seasonal rally. Two keys to watch on the export front are the U.S. dollar and Chinese demand.

Hedgers: Carry all risk in the cash market for now.

Feed needs: Profits have been claimed on 1st-qtr. feed coverage that was held in March corn and meal futures. 25% of 2nd-qtr. corn needs are covered in long July corn futures at $6.78 3/4 and 25% of 2nd-qtr. protein needs are covered in long July soymeal futures at $388.00.

 

 

Cattle

Price action: Cattle futures reacted with sharp losses to news of 50 cents to $1 lower cash cattle trade at $127 and ended $1.50 to $2.27 1/2 lower for the day and sharply lower for the week. April cattle ended the week $1.77 1/2 lower than last week's close and did more technical chart damage by posting a fresh contract low.

5-day outlook: April live cattle have moved to a discount to the cash market and have entered oversold territory. This should help to limit pressure on futures to start next week, although focus has turned to concerns that high prices are curbing demand. Boxed beef prices remain historically strong, but movement has slowed dramatically as retailers switch to less expensive poultry and pork for features.

30-day outlook: Exports were a bright spot for the market this week, however. Japan was the lead buyer in the latest weekly export sales report, but traders will want to see this trend continue before they will be convinced Japan's demand for U.S. beef has improved dramatically.

90-day outlook: The market's focus has shifted to demand and away from the tight supply situation. But as the year progresses and beef production tightens, higher prices should be seen.

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: Profits have been claimed on 1st-qtr. feed coverage that was held in March corn and meal futures. 25% of 2nd-qtr. corn needs are covered in long July corn futures at $6.78 3/4 and 25% of 2nd-qtr. protein needs are covered in long July soymeal futures at $388.00.

 

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