EHedger Livestock Commentary 10/07/09

Published on: 16:39PM Oct 07, 2009
 
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Live Cattle
Feeder Cattle
Lean Hogs
LCV9
82.225
-0.075
FCV9
93.35
+0.50
LHV9
50.90
+0.80
LCZ9
84.075
+0.525
FCX9
93.175
+0.425
LHZ9
51.75
+2.625
LCG0
84.825
+0.375
FCF0
94.45
+0.675
LHG0
58.60
+2.375
 
Index
94.49
-0.30
Index
50.52
-0.23
 
 
Live Cattle: 
 
·        Panhandle trades $81.50 live; KS trades $81.50 and 128.50 dressed
·        NE trades $80-81 live; CO trades $81 live
 
Live cattle closed higher on the day, except for October, which is in delivery. Cash traded lower again today, down roughly $1.50 from the previous week. However, the setback in futures looks to have priced in these losses. Gains look to be from profit taking and the sharply higher hog market. Midday boxed beef was mixed with Choice at 134.88 down .41 and Select at 129.44 up .11. The choice/select spread has narrowed further showing weak sales as consumers are not willing to pay for the higher cuts. The sharply lower prices last week have now pushed packer margins into negative territory and this will keep packers from being aggressive buyers. Beef prices and sales need to pick up in order to get stability to the market. This will be the key issue needed to turnaround the struggling cattle market: better sales. Otherwise, the market looks to remain sideways/negative this week.
 
 
 
Boxed Beef Cutout Values
Choice
Select
Loads
134.59
-0.70
129.40
+0.07
382
Choice/Select spread settled at +5.19
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
121,000
125,000
122,000
370,000
372,000

 
 
Feeder Cattle: 
 
Feeders closed higher on the day. Feeders finally stopped their losing streak, but today’s gains look to be a function of profit taking. Cash feeder prices have struggled along with live cattle prices and the higher corn is negative. Heavy weight feeders coming off pasture are a reason why supply has been adequate and the demand side of feeders has struggled with tight feedyard credit and declining fed cattle prices. Smaller supplies look to be around the corner after we get through the fall run, but the question will be how much lower can futures go before that turnaround? On oversold condition, long fund exposure, and futures discount to the CME index look to be the only supporting factors this week.
 
 
Lean Hogs: 
 
Direct hog markets were mixed with the IA/So.MN direct market at $49.31 up .18; Western cornbelt $49.50 up .40; Eastern cornbelt $46.24 down .11; and the National average at $48.42 up .03
 
Pork Carcass Cutout Values
 
 
Loads
52.62
-0.33
76
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
435,000
433,000
427,000
1.302
1.297
 
Pork cutout; loins +1.03, hams –2.82 (40.53)
IA/MN hog weights 268.4 lbs. vs. 268.5 wk ago and 265.9 yr ago
 
Lean hogs closed sharply higher on the day. Round 2 of short covering and strong fund buying led the rally. Remember last week that Deutsche Bank announced a restructuring of two commodity funds with one fund adding long hog positions. This week’s action looks to a result of buyers front running this action and funds wanting exposure to commodities that puts them “short” the US dollar. The fundamentals behind today action were linked to yesterday’s higher cash market and outlooks for improved exports with the dollar near 2009 lows. Today’s action has now pushed futures above the CME index and this will limit October’s gains as it works towards expiration. Today’s weekly hog weights remain heavy, but steady with previous weeks. Year ago levels are narrowing the difference. Supply still lingers over the market as the bearish point, but packers are at profitable levels. As long as this continues hogs downside is becoming diminished. The cutout staying above $50 will be a key gauge. This “tug of war” (bulls vs. bears) is far from over for the remainder of the year. This week’s gains appear overdone (especially with a second day of cutout losses) so look for a late week pullback.
 
 
 
 
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Regards,
EHedger LLC
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Trading commodity futures involves substantial risk of loss and may not be suitable for all investors. The recommendations express opinions of the author. The information they contain is obtained from sources believed reliable, but is in no way guaranteed. The author may have positions in the markets mentioned including at times positions contrary to the advice quoted herein. Opinions, market data, and recommendations are subject to change at any time.