Livestock Analysis (VIP) -- November 16, 2012

November 16, 2012 08:37 AM



Price action: Lean hog futures ended split with nearbys 5 to 30 cents higher and deferred months slightly lower amid bull spreading. Most contracts settled slightly higher for the week.

5-day outlook: Trading volume across the commodity sector will be light ahead of Thanksgiving. The cash market will likely continue to trend steady to lower as supplies are expanding and packer demand will be limited by a holiday-shortened schedule. More choppy action is likely as traders ready positions for Wednesday's Cold Storage Report.

30-day outlook: Pork demand will likely benefit from increased holiday buying in the month ahead, but as supplies will continue to expand to their highest point of the year, the market's upside is likely limited, especially considering that the cash hog market typically softens into year-end.

90-day outlook: Hog supplies will begin to tighten in early 2013, which opens upside potential for hog futures and the cash market. Plus, pork export demand has remained strong and is expected to remain so. USDA raised its 2013 export projection in its latest WASDE report.

Hedgers: Carry all risk in the cash market for now.

Feed needs: Carry all corn-for-feed and soybean meal risk in the cash market for now.



Price action: Live cattle futures strengthened into week's end as traders evened positions ahead of this afternoon's Cattle on Feed Report. While no cash cattle trade was reported by press time, live cattle futures posted moderate gains for the week. Most feeder cattle contracts ended the week slightly below last week's close.

5-day outlook: This afternoon's Cattle on Feed Report came in about as expected, which means traders' focus will return to cash market prospects and evening positions ahead of Thanksgiving. The report, however, could provide support for deferred futures as it reminded the market of the tightening supply situation.

30-day outlook: The boxed beef market holds the key for near-term cash direction. Traders were surprised this week by strong beef movement, which signals retailers are planning to feature beef between Thanksgiving and Christmas. But recent sharp pressure on the U.S. stock market has traders concerned beef demand could soften after Thanksgiving as consumers focus on holiday purchases.

90-day outlook: Current technicals and fundamentals point to a "blow-off top" in live cattle futures in 2013, which is when the next 10-year cycle high is due. But in order to encourage heifer retention, pasture conditions across the Plains must improve. Still, 2013 will feature lower beef production than in 2012.

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.

Feed needs: Carry all corn-for-feed and soybean meal risk in the cash market for now.

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