Livestock Analysis (VIP) -- November 9, 2012

November 9, 2012 08:15 AM
 

Hogs

Price action: Lean hog futures closed mostly 10 to 55 cents higher today to finish the week with strong price gains.

5-day outlook: Traders aggressively narrowed the discount December hogs hold to the cash market. That will make it difficult to aggressively build on this week's price strength next week if the cash hog market remains steady to weaker. While packer margins are strong, market-ready supplies are plentiful and pork plants are bought ahead on slaughter needs, which is likely to keep cash hog bids under mild pressure.

30-day outlook: Holiday ham buying should give the pork product market a boost to close out the year. Given that the pork product market has been relatively strong in the face of hefty supplies so far this fall, price pressure should be limited unless seasonal demand disappoints.

90-day outlook: USDA lowered its 2013 pork production forecast, which it now sees down 1.4% from this year. Market hog numbers should start to ease by the middle of the first quarter next year and then decline through mid-summer.

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

Feed needs: 50% of remaining 4th-qtr. protein needs are covered in long Dec. meal futures at $487.10 and 25% of expected 1st-qtr. needs are covered in long March meal futures at $468.50. Carry all corn-for-feed risk in the cash market for now.

 

 

Cattle

Price action: Live cattle futures favored a firmer tone today, allowing December through April futures post slight gains for the week. Far-deferred futures posted slight losses for the week. Feeder cattle futures were steady to weaker today and posted slight losses for the week.

5-day outlook: Live cattle futures are likely to continue in their choppy trading ranges next week as traders weigh demand concerns against tight market-ready supplies. Traders will also be preparing for the monthly Cattle on Feed Report next week, which will remind traders of the tightening supply situation. Placement of cattle into feedlots is expected to remain below year-ago levels for at least the next several months.

30-day outlook: Traders are also keeping a close watch on the boxed beef market as they try to gauge how much impact will be felt from the East Coast's recovery from Superstorm Sandy. Beef exports have also improved recently, but that could be stalled if the U.S. dollar index continues to climb.

90-day outlook: Year-to-date beef production is down 1.7% from year-ago and USDA sees production slipping 4.2% in 2013 compared to this year. Cash cattle prices around the $130-level should become a more regular occurrence next year as supplies will be razor thin.

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: 50% of remaining 4th-qtr. protein needs are covered in long Dec. meal futures at $487.10 and 25% of expected 1st-qtr. needs are covered in long March meal futures at $468.50. Carry all corn-for-feed risk in the cash market for now.
 

 

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