Livestock Analysis (VIP) -- September 13, 2013

September 13, 2013 09:49 AM


Price action: Lean hog futures favored a firmer tone in mixed trade and finished 50 cents higher to 25 cents lower. For the week, October hogs posted marginal losses but bulls still have the technical advantage.

5-day outlook: Traders are keeping a very close watch on the pork cutout market for signs of a seasonal top. Pork cutout movement was very strong this week, but prices softened into week's end, giving the first hint that a top may be near. Traders will also be keeping close tabs on the cash market after it posted stronger-than-expected recent gains. Expectations are that producers will catch up on marketings now that temperatures have moderated.

30-day outlook: USDA will release its Quarterly Hogs & Pigs Report at the end of the month. Key will be whether producers' have changed their "steady-as-she-goes" attitude toward farrowing intentions.

90-day outlook: The hog market has a tendency to overdo price moves in either direction. As a result, we're watching for signs of a high to extend hedge coverage into 2014 due to expectations pork production will uptick next year.

Hedgers: 50% of expected 4th-qtr. production is hedged in Dec. lean hog futures at an average price of $82.12 1/2.

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: Live cattle and feeder cattle futures traded in a narrow range today, closing near the day's highs and slightly higher for the week in all but the lead-month October live cattle contract.

5-day outlook: Packers tried to get cattle bought at $121 in the Southern Plains but were unable to find any takers. Trade did begin when bids were boosted to $123, leaving the market unchanged with the previous week. This hints at steady (to possibly higher) cash trade next week, though traders are waiting for a seasonal upswing in wholesale beef to lift prices.

30-day outlook: Declining numbers and seasonal trends point to a rise in cash prices going forward. But the wholesale beef market has not yet shown signs it will be able to sustain trade above $200. Retailers appear to be concerned over consumer resistance to higher beef prices. With supplies slated to decline, look for prices to slowly grind higher.

90-day outlook: With cattle numbers slated to decline, cattle prices should work toward their 10-year cycle high in 2014. Traders will look for clues in next Friday's Cattle on Feed Report that cow-calf operators are holding back heifers for expansion purposes. When they do, the process off putting in a cycle high will pick up as beef supplies will tighten even further.

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.


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