Livestock Analysis (VIP) -- November 15, 2013

November 15, 2013 08:52 AM


Price action: Live cattle futures ended split with December through April contracts 7 1/2 to 42 1/2 cents higher while deferred months posted slight losses. Feeder cattle futures ended 12 1/2 to 62 1/2 cents higher on the day. Both markets posted week-over-week gains.

5-day outlook: Improvement in the boxed beef movement this week provided support for futures and led to the start of light cash cattle trade at $1 higher prices of $132 in Texas and Kansas. Futures already have higher trade factored into prices.

30-day outlook: Traders are comfortable with nearby futures trading at a premium to the cash market, due to tightening market-ready supplies. However, there is very little carry in the market for deferred futures, which suggests traders aren't convinced beef prices will be high enough in 2014 to push the cash market the next leg higher.

90-day outlook: Talk that packers could scale back kill requirements to accommodate tighter market-ready supplies has traders nervous about adding carry into deferred futures. But with the boxed beef market finding consumer acceptance above the $200 level, the outlook remain bullish well into 2014.

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: 25% of 4th-qtr. protein needs are covered in long Dec. meal futures at $422.20 and 25% of 1st-qtr. needs are covered in long March meal futures at $410.80.



Price action: Lean hog futures ended the day steady to 47 1/2 cents higher in all but far deferred contracts. Nevertheless, the market sustained hefty losses for the week.

5-day outlook: Bears hold the advantage heading into next week after this week's technical deterioration. Packers are having no difficulty securing needed supplies and are enjoying profitable margins. The good news is pork product movement was strong this week. If this continues next week, it could help to limit price pressure.

30-day outlook: Hog weights have exploded higher since mid-October and they typically increase well into November. Producers are taking advantage of cheaper corn prices and adding extra weight to each animal. If this trend continues, it will add even more price pressure over the next month as supplies continue to build seasonally.

90-day outlook: It remains to be seen how much of an impact the porcine epidemic diarrhea virus (PEDV) situation will have on marketings in 2014. But for now, this situation is priced into the market and traders are focused on expectations supplies will build into year's end.

Hedgers: 100% of expected 4th-qtr. production is hedged in Dec. lean hog futures at an average price of $83.74; 50% of 1st-qtr. marketings are hedged in Feb. lean hog futures at $89.70.

Feed needs: 25% of 4th-qtr. protein needs are covered in long Dec. meal futures at $422.20 and 25% of 1st-qtr. needs are covered in long March meal futures at $410.80.

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