EHedger Livestock Commentary 1/12

Published on: 16:35PM Jan 12, 2010
Live Cattle
Feeder Cattle
Lean Hogs
LCG0
85.45
+0.40
FCF0
97.80
+1.525
LHG0
66.40
-0.275
LCJ0
89.225
Unch
FCH0
98.30
+1.90
LHJ0
71.025
-0.275
LCM0
87.65
-0.05
FCJ0
99.275
+1.775
LHM0
78.975
-0.375
 
Index
94.89
 
Index
67.62
+0.76
 
 
Live Cattle: 
 
            Limit down corn; grains sharply lower following bearish USDA report
            TX trades $85 live; KS trades $85-85.50 live
 
Live cattle closed mixed to higher on the day. Live cattle were mostly lower during the session, but found late buying into the close. Cash trade was steady and basis levels are firm, above 3 and 5 year averages. Limit down corn and lower outside markets led to early pressure. The USDA reported higher corn and bean yields than expected resulting in gains to the ending stocks. Boxed beef was higher again leading to thoughts of improved demand and slaughter interest. During the fluctuation in temperatures we will have to monitor feedyard conditions as snow/ice melts/refreezes and its affect on cattle health and weights. This last round of cold weather has resulted in lighter cattle. Midday boxed beef was higher with Choice at 144.85 up 1.00 and Select at 139.24 up .47. 
 
Futures are trading near some key technical areas. A leg higher cannot be ruled out in the near term (fund buying, weather, cattle numbers). Demand has improved, but April is meeting resistance at $90 and above. If the winter weather continues to be excessively cold this may be the factor to push futures above resistance. One way to take advantage is bull spreading April/June.
 
 
Boxed Beef Cutout Values
Choice
Select
Loads
144.95
+1.10
139.35
+0.58
228
Choice/Select spread settled at +5.60
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
126,000
126,000
127,000
252,000
246,000

 
 
Feeder Cattle: 
 
Feeders closed sharply higher on the day. The catalyst to push feeders through resistance and to 4-month highs was the limit down corn market. The corn synthetics were trading another 10-cents lower. Funds were strong buyers of feeder cattle as March corn was locked limit down the entire day. The fact that feeders closed on their highs with strength will be a positive sign into tomorrow. Today’s USDA report surprisingly increased the corn yield. These numbers should be enough to start a downtrend in the corn market. Otherwise, feeder gains were a bit limited during the day while live cattle futures were lower. The corn market trending lower is welcomed to cattle feeders, but in order to continue the strength live cattle prices need to work higher. 
 
 
Lean Hogs: 
 
Direct hog markets were higher with the IA/So.MN direct market at $65.61 up .77; Western cornbelt $65.22 down .48; Eastern cornbelt $65.34 up .47; and the National average at $65.01 up .24
 
Pork cutout; loins -.16, hams +.63
Revised Monday hog slaughter 425,000 head (-5,000)
 
Lean hogs closed lower on the day. Futures closed near the highs of the session as strength in all livestock markets were found at the close. Otherwise, lean hog futures were as much as $1 lower behind sharply lower grain markets and yesterday’s weak cash bids. However, the CME index was higher. Open interest has shifted into the April from February. There are still two more days remaining on the Goldman roll. Hog slaughter for the week started firmly as weather has improved and hog marketings have been backed up. This should keep cash prices soft as packers are in the driver’s seat for bidding on hogs this week. Their margins are in the black, so they will want to process as many hogs as possible.
 
Futures are back at price levels where viewpoints vary widely. Bullish thoughts point to the strong cash and cutout values. Bearish ideas say that the futures premium is overdone. The question remains is the demand sustainable or a factor of the reduced weekly slaughter? 
 
 
Pork Carcass Cutout Values
 
 
Loads
71.23
+0.14
85.13
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
430,000
428,000
421,000
855,000
839,000


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