EHedger Livestock Commentary 3/27/09

Published on: 17:00PM Mar 27, 2009
 
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Live Cattle
Feeder Cattle
Lean Hogs
LCJ9
84.325
+0.05
FCJ9
93.125
-0.30
LHJ9
60.475
-0.05
LCM9
81.575
-0.275
FCK9
94.30
-0.65
LHK9
71.20
-0.375
LCQ9
82.525
-0.15
FCQ9
96.90
-0.55
LHM9
71.40
-0.375
 
Index
93.12
-0.33
Index
56.91
+0.24
 
 
Live Cattle: 
 
  • Texas cash trades $83; NE trades 83 live and 133-134 dressed
  • CO trades 83.50 live and 133 dressed; IA trades 132-134 dressed
 
Live cattle closed lower on the day, except for front month April. April was supported today due to cash trade surfacing at $83. Today’s slaughter was very light at 89,000. Both of these appear to be a result of the severe weather throughout many cattle regions that is preventing deliveries to plants. Tomorrow packers may still be buying cattle at steady money. The snowstorms should benefit the packer as less animals being slaughter should boost poor performing beef prices, while backing up marketing into next week. If this puts pressure next week on June/Aug futures this looks to be a good buying opportunity. Midday wholesale beef was lower with choice at 133.30 down 1.02 and select at 134.13 down 0.50. The choice/select spread settled at a discount for the second day in a row! This seems to be a result of two factors. First, demand for choice remains weak compared to select cuts as consumers are in cost saving mode. Second, cattle weights have been heavier thus heavy cattle are grading out choice keeping a surplus in choice meat. 
 
 
 
Boxed Beef Cutout Values
Choice
Select
Loads
133.58
-0.74
134.17
-0.46
244
Choice/Select spread settled at –0.59
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
89,000
118,000
115,000
578,000
603,000

 
Feeder Cattle: 
 
Feeder cattle closed lower for the day. Feeders opened steady with live cattle, yet began to trade lower as deferred live cattle were pressured. Futures continue to trade within a range and seem more technical lately than fundamental. Current technicals are showing further weakness with May settling under the 40-day moving average and just above the 20-day. A lower market could develop next week with these technicals, but I am not expecting prices to work sharply lower. 
 
Lean Hogs: 
 
Direct hog markets were higher with the IA/So.MN direct market at $57.06 up .65; Western cornbelt $57.24 up .76; Eastern cornbelt $54.37 up 1.01; and the National average at $56.03 up .55. 
 
Pork Carcass Cutout Values
 
 
Loads
57.54
-0.26
23.6
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
403,000
419,000
422,000
2.103
2.022
 
  • IA/MN hog weights 269.5 lbs vs. 268.7 wk ago and 267.5 yr ago
  • Today Hogs and Pigs report was released
 
 
USDA
Ave. Estimate
Total on March 1
97
96.9
Kept for Breeding
97
97.9
Kept for Marketing
97
96.8
Dec-Feb pig crop
99
98.5
Dec-Feb pigs per litter
103
101.8
Dec-Feb farrowings
97
96.6
Mar-May farrowing intentions
97
98
Jun-Aug farrowing intentions
96
98.5
Hogs weighing
97
96.8
Hogs 60-119 lbs
97
96.2
Hogs 120-179 lbs
97
96.2
Hogs over 180 lbs
98
97.7
 
 
Lean hogs closed lower on the day, except for the month of Aug, which was higher due to spreaders. Trade was extremely quiet with speculators awaiting the hog and pig report. Many traders had been holding on to hopes of a bullish report, yet the summer months already have a noticeable premium to front month April.  Total numbers, kept for breeding, and kept for marketing were all near estimates. It did show a 3% reduction in hog numbers, yet we were expecting this. The number of pigs per litter continues to be bearish pork prices. Hog producers once again show they are very efficient by trending this figure higher. However, it is working against hog numbers getting lowered. The slaughter was at 403,000 with a Saturday kill of 110,000 giving a WTD of 2,213,000. Generally there was not much news aside from the hog and pig report. Next week I do not expect any sharp reaction as a result of today’s report and see the path of least resistance to the downside. Hogs are approaching previous contract lows! If the cash and cutout can work higher next week these lows should hold, yet it appears they will be tested.
 
 
 
 
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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.