Livestock Analysis (VIP) -- March 22, 2013

March 22, 2013 10:24 AM
 

Hogs

Price action: Lean hog futures faced pressure most of the day, but late short-covering helped the market to a generally high-range, mixed finish. Nearby contracts posted losses for the week while deferred months were little changed compared to last Friday.

5-day outlook: Today's Cold Storage Report came in about as expected with pork stocks in storage as of Feb. 28 at 636.693 million pounds. But the fact that this is a 5% increase over last month and a 2% increase over year-ago could encourage some profit-taking early next week as it adds to already existing pork demand concerns.

30-day outlook: Until the market finds a price that lifts pork demand, the market will continue on a downtrend. Eventually, a warm-up in temps should give the market a lift, especially if relatively expensive beef prices encourage consumers to throw cheaper pork on the grill.

90-day outlook: The pork and cash market typically begin a rally in late May as temps pick up and supplies tighten. The extent and duration of this rally will be influenced by the market's ability to chew through surplus supplies in the months ahead.

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.

 

Live cattle

Price action: Live cattle futures faced pressure to wrap up the week and ended 22 1/2 to 82 1/2 cents lower for the day. Most contracts ended with slight week-over-week gains.

5-day outlook: Today's Cattle on Feed Report should help the cattle market to put in a low next week and it reflected even more supply tightening than expected, with On Feed coming in at 93% of year-ago and Placements at 86% of year-ago levels. This signals feedlots are current and feeder calf supplies are tightening.

30-day outlook: Traders appeared unconcerned with narrowing the premium front-month futures hold to this week's cash prices. This signals traders expect spring grilling will soon help the beef and thus the cash market to rebound.

90-day outlook: Congress this week put an end to meat inspector furloughs this summer, which should allow traders to shift their attention back to the fundamentals. A 10-year cycle high is expected the latter half of 2013; in the meantime, tightening supplies should keep a floor under the cash market. Key to action in the months ahead is how consumers respond to lofty beef prices and a slowly improving economy.

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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