EHedger Livestock Commentary 10/12/09

Published on: 17:20PM Oct 12, 2009
 
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Live Cattle
Feeder Cattle
Lean Hogs
LCV9
82.20
-0.425
FCV9
94.025
-0.15
LHV9
50.125
-0.725
LCZ9
85.30
+0.35
FCX9
94.175
-0.30
LHZ9
53.825
+1.05
LCG0
86.20
+0.275
FCF0
95.025
Unch
LHG0
59.525
+0.525
 
Index
92.35
-1.20
Index
50.75
+0.05
 
 
Live Cattle: 
 
Live cattle closed higher on the day, except for the October contract. Showlists are reported lower offering support, but the higher outside markets and fund buying were the main themes today. Financial markets made new highs for 2009 and are slowing bringing back confidence for meat demand. Yet, the cattle market still has a challenging road ahead. Cattle need to turnaround a struggling cash market and see sales numbers increase. December closed above its 20-day moving average of 85.10 and next resistance will be 85.60-86.10. Midday boxed beef was mixed with Choice at 133.92 down .06 and Select at 129.64 up .17. The choice/select spread has narrowed further showing weak sales as consumers are not willing to pay for the higher cuts. Packer margins are near breakeven and need to push into positive territory through better beef prices and sales. This will be the key issue needed to turnaround the struggling cattle market: better sales. The next cattle on feed report is Friday, 10/16, so estimates will be posted later this week.
 
 
Boxed Beef Cutout Values
Choice
Select
Loads
134.02
+0.04
129.49
+0.02
257
Choice/Select spread settled at +4.54
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
 
 
 
634,000
652,000

 
 
Feeder Cattle: 
 
Feeders closed slightly lower on the day. Negative price action due to sharply higher corn looks to already be behind us as the corn market surged higher making new highs since June. Instead feeders are focusing on the upcoming cold temperatures and steady to higher live cattle futures. If corn turns lower as harvested acres increase then we could easily see futures regain losses over the past 3 weeks. Early week cash feeders in Oklahoma City are steady with good demand, Joplin stockyards are steady to $2 lower priced.
 
 
Lean Hogs: 
 
Direct hog markets were lower with the IA/So.MN direct market at $48.39 down .09; Western cornbelt $48.44 down .18; Eastern cornbelt $46.86 down .09; and the National average at $47.88 down .09
 
Pork Carcass Cutout Values
 
 
Loads
53.24
+0.29
38
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
 
 
 
2.299
2.374
 
Pork cutout; loins +.32, hams -.32 (40.23)
 
Lean hogs closed higher for the day, except for front month October. October expires this Wednesday, 10/14, and is nearly at par with the CME index. Fund buying resumed today with most commodities higher and the US dollar lower yet again. December closed above the 100-day moving average of 53.56, but will need new information for further sharp rallies from here. Futures are carrying a $3 premium over the index and cash values remain slightly under $50. Current positive margins for packers should keep cash markets steady to higher this week. Yet, they will likely not chase hogs higher as slaughter numbers are easily attainable.
 
The USDA supply/demand report showcased some concerning figures on pork exports for the month of August. Exports were disappointing showing approximately 90,000 MT for the month, which is below the previous month (and below 100,000 MT). This is during a time of cheap pork prices and a weak US dollar. The biggest decrease of exports was to Russia, which was 10,000 MT less than the previous month, and for Japan the figure was 6,000 MT less. The bottom line is exports for the remainder of the year need to increase if the hog market is going to continue to surge higher, otherwise, this will be a limiting factor for hog prices.
 
 
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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.