EHedger Livestock Commentary 10/20/09

Published on: 17:14PM Oct 20, 2009
 
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Live Cattle
Feeder Cattle
Lean Hogs
LCV9
84.90
+0.20
FCV9
94.25
-0.55
LHZ9
52.875
-1.175
LCZ9
86.15
-0.30
FCX9
95.20
-0.325
LHG0
59.75
-1.075
LCG0
86.50
-0.35
FCF0
95.65
-0.375
LHJ0
64.70
-0.70
 
Index
93.01
-0.26
Index
51.51
-0.09
 
 
Live Cattle: 
 
·        KS trades $84.50 live and 136 dressed; IA trades 130 dressed
·        NE trades $84.50-85 live and 132 dressed
 
Live cattle closed lower on the day, except for October. While yesterday’s action was higher, today’s outlook was lower due to thoughts that gains had outpaced the trend and lower outside markets. Yet cattle managed to rebound and is currently trading higher in after hours Globex trading. The higher cash trade sparked this buying interest, which saw nearly 1000 December contracts trade (2:35-2:40 pm) pushing futures briefly above $87. The early week higher cash trade along with firmer boxed beef will keep fundamentals moving positively. Open interest continues to increase and this trend look likely to continue. Midday boxed beef was higher with Choice at 138.07 up 1.30 and Select at 133.09 up .84. Higher cash and boxed beef to finish last week is encouraging looking ahead. However, to sustain the upward movement we will need to see this fundamental action continue to move higher. The higher trend and fund movement could trigger additional buying. 
 
The latest cattle on feed report is mostly neutral. On feed numbers are higher than a year ago, which has not happened in awhile and marketing numbers were a bit lighter than expected. During September placements of cattle greater than 800 lbs. accounted for 36% of the total 2.34 million head. Will this current month see the same category at an even greater number or have we moved the majority of heavy weight feeders off pasture?
 
 
Boxed Beef Cutout Values
Choice
Select
Loads
137.96
+1.19
132.99
+0.74
228
Choice/Select spread settled at +4.97
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
127,000
124,000
127,000
250,000
254,000

 
 
Feeder Cattle: 
 
Feeders closed lower on the day. The lower outside markets and premium futures are currently carrying over the CME index was enough to spark profit taking and shorts. November traded below our key area $95, but managed to close above this figure and in midrange. The continuation of positive fundamentals (higher cash live cattle and higher boxed beef) will keep support in the feeder market this week. Resistance is found from futures carrying a premium over the CME index, but higher live cattle and fund buying could be the bigger factor for November futures in the near term.  
 
Lean Hogs: 
 
Direct hog markets were higher with the IA/So.MN direct market at $53.15 up 2.30; Western cornbelt $53.21 up 2.29; Eastern cornbelt $48.92 up .38; and the National average at $52.27 up 2.01
 
Pork Carcass Cutout Values
 
 
Loads
55.48
-1.24
94.3
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
432,000
431,000
429,000
859,000
861,000

 
Pork cutout; loins -1.80, hams -.29
Revised Monday Hog slaughter 427,000 head (-9,000)
 
Lean hogs closed lower on the day. Futures closed with triple digit losses, but bounced from the lows of the day. Cash hogs remain steady to sharply higher given the cutout strength amid big supply numbers. However, concern still remains about the ability of the cutout to continue higher in the 4th quarter. Today’s value was lower. Open interest decreased sharply today. One thought is that traders took profits as we are trading at resistance areas due to the H1N1 story of hogs in Minnesota. In my opinion this is not a major issue right now, but everyone needs to be mindful of how the media and public react to this news. This could keep buyers on the sidelines as prices have already shown a large October rally. Remember that you cannot obtain the flu through eating pork. 
 
 
 
 
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Regards,
EHedger LLC
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Suite 1520A
Chicago, IL 60604
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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.