Livestock Analysis (VIP) -- March 28, 2013

March 28, 2013 10:08 AM
 

Hogs

Price action: Lean hog futures were choppy in early trade, but most contracts finished high-range with gains of 2 1/2 to 52 1/2 cents. Hogs posted strong gains for the week.

5-day outlook: USDA's Hogs & Pigs Report was mildly bearish as it reflected slightly greater-than-expected expansion in the hog industry. This week, the market staged a late-week rebound on ideas a seasonal low is near. But buying interest largely consisted of short-covering. For the market to see followthrough buying, the pork market must put in a seasonal low.

30-day outlook: Spring typically goes hand in hand with increased grilling demand. And pork may well be perceived as a "value" relative to beef this year as tightening disposable incomes could encourage consumers to be more price-conscious as to what they throw on the grill. But any rebound could be slow going as last week's Cold Storage Report pointed to very hefty frozen pork stocks.

90-day outlook: Demand is key to the price outlook for hogs longer-term, especially considering the market's struggle to work through already record-large frozen pork supplies and recent struggles with export demand in places like Russia and China. Recent mysterious deaths of hogs in China, if continued, could eventually boost its pork demand, however.

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: Live cattle futures gapped higher on the open and firmed as the day progressed. Futures ended $1.17 1/2 to $1.55 higher through the December contract. Feeder cattle finished at their $3.00 daily limit higher in all but the March contract, which expired 25 cents higher today. For the week, both markets finished with sharp gains.

5-day outlook: Tightening supplies and improved movement sparked firmer cash cattle trade today, suggesting the cash market has put in a low. But for the market to build on this idea next week, the boxed beef market must strengthen. Higher grain stocks indicated by USDA should help feeder cattle confirm a short-term low.

30-day outlook: As temps warm up, beef demand should rise as consumers fire up the grill. Key, however, will be how consumers react to high prices. Most are facing tightening disposable incomes, as gas prices remain at lofty levels, income growth has been minimal and most Americans saw taxes and health care expenses rise for 2013.

90-day outlook: Last Friday's Cattle on Feed Report pointed to tightening supplies down the road as Placements came in at just 86% of year-ago levels. The supply side of the market is bullish if demand concerns are eased.

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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