Livestock Analysis (VIP) -- September 7, 2012

September 7, 2012 09:51 AM


Price action: Lean hog futures ended high-range today, although that was steady to 75 cents lower . This added to the market's heavy losses for the week.

5-day outlook: Lean hog futures dipped into technically oversold territory this week according to the nine-day Relative Strength Index. This could encourage some short-covering next week, but that will be the extent of buying interest as supplies remain burdensome.

30-day outlook: Hog supplies will continue to expand seasonally through fall and into winter. Key will be if harvest-related pressure on the grain and soy markets leads to a price break significant enough to slow aggressive sow liquidation. But at best, this would limit the steepness of the seasonal decline in cash hog and pork prices this fall.

90-day outlook: The long-term effect of aggressive herd liquidation is tighter supplies down the road, but this will not be seen for quite some time as the third and fourth quarters are the heaviest production periods of the year. However, retailer buying for the holidays should help hogs put in a low before the start of the first quarter when production starts to wane.

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

Feed needs: Risk is covered in the cash market for now.




Price action: Live cattle futures posted gains for the week, with the December contract ending 52 1/2 cents above last week's close. Feeder cattle futures posted slight losses for the week.

5-day outlook: Continued strength in the boxed beef market signals Labor Day clearance was strong and retailers are preparing for a round of post-holiday features. Given strength in the beef market and tightening supplies, traders are comfortable with nearby futures at a premium to the cash market. Cash trade was beginning this afternoon at $1 to $2 higher than last week in Nebraska.

30-day outlook: Beef prices are nearing a level that has slowed demand in the past, and there is also concern a growing pork supply will limit the beef market's seasonal advance. But even if beef demand slows, the tightening supply situation limits downside risk for both the cash market and futures.

90-day outlook: In order to encourage producers to hold back heifers, they need to be confident that pasture conditions will improve with fall and winter moisture. While some improvement has been seen in the Midwest, the Plains have missed out on recent precip and producers there are still liquidating herds.

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: Risk is covered in the cash market for now.

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