Livestock Analysis (VIP) -- March 8, 2013

March 8, 2013 08:45 AM
 

Hogs

Price action: Lean hog futures ended slightly higher in all but the June contract, which was 32 1/2 cents lower today. For the week, lean hog futures posted modest corrective gains.

5-day outlook: Based on the daily price charts, hog futures are signaling a potential "V" bottom. To extend this week's gains and turn them into more than a correction, however, traders' concerns with pork demand must ease.

30-day outlook: Hog slaughter and kill weights suggest producers are pulling hogs forward. If that's the case, a marketings "hole" will develop sometime in the next month. That could be what kick starts a delayed seasonal rally in the cash hog market and in lean hog futures.

90-day outlook: USDA trimmed 90 million lbs. from its pork export forecast amid softened demand, presumably because of the ractopamine situation. With demand concerns hanging over the market, a "normal" seasonal rally into summer is not likely.

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 closed 65 cents to $1.07 1/2 lower today and solidly lower for the week.

5-day outlook: Until concerns with beef demand ease, the upside remains limited to corrective short-covering and there's risk of fresh selling. With that said, tight supplies should limit downside risk as the market searches for a bottom.

30-day outlook: After cutting in the red for months, some packers saw margins turn positive this week. If that remains the case, it could increase packers' willingness to bid up for cash cattle moving forward given tight supplies. But retailers are showing resistance to higher boxed beef prices. That must change or boxed beef prices will soften and packer margins will move back into the red.

90-day outlook: Seasonally, beef demand should improve as the weather warms and grilling season gets underway. But there are concerns a sluggish U.S. economy could limit the normal seasonal pickup in beef demand. Plus, if the U.S. dollar continues to strengthen, it could hold back beef exports.

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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