Livestock Analysis (VIP) -- May 3, 2013

May 3, 2013 09:56 AM
 

Hogs

Price action: Lean hog futures saw a choppy day of trade and ended 72 1/2 cents lower to 35 cents higher for the day. For the week, the May contract posted moderate gains, while the rest of the market ended with slight losses.

5-day outlook: The pork market has shown signs of life lately as retailers gear up for Memorial Day grilling features. Some expect consumers to favor relatively inexpensive pork over beef or poultry this grilling season. Meanwhile, hog supplies are tightening seasonally. This combination should continue to limit selling interest in lean hogs.

30-day outlook: The seasonal tendency is for the pork product and cash hog markets to rally into mid-summer. The extent of this rally will be determined by how much supply the market has to chew through. Carcass weights are climbing, partially offsetting seasonally declining market-ready supplies. Plus, exports are down 15% for the first three months of 2013 relative to last year.

90-day outlook: The Chinese bird flu has resulted in heavy culling of the country's poultry flock. Eventually, China will buy pork as a replacement to this source of protein.

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.

 

Cattle

Price action: Live cattle futures finished sharply lower today, which resulted in slight losses for the week.

5-day outlook: While cash cattle traded steady to firmer this week, traders extended the discount summer-month live cattle futures hold to the cash market. That's a clear sign attitudes are bearish due to demand concerns. Futures' discount to the cash market clears the way for a corrective rebound, but active buying interest is likely to remain limited next week as traders are concerned the cash and product markets are nearing a short-term top.

30-day outlook: With winter-like conditions hanging around much longer than normal and boxed beef prices near record levels, there are multiple concerns on the domestic demand front. Plus, export data signals beef exports were down from year-ago in March and for the first quarter. Fortunately, the supply side is friendly. Until the demand concerns are calmed, however, tightening supplies will do little more than limit downside price risk.

90-day outlook: Traditional "beef" holidays include Father's Day, the Fourth of July and Labor Day. If beef clearance is sluggish during any of these holidays, demand concerns will linger through the key summer demand season.

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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