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EHedger Livestock Commentary 3/30/09

Published on: 18:09PM Mar 30, 2009
 
(866) 433-4371         info@EHedger.com
 
 
Live Cattle
Feeder Cattle
Lean Hogs
LCJ9
82.825
-1.50
FCJ9
92.20
-0.925
LHJ9
60.075
+0.075
LCM9
80.075
-1.50
FCK9
93.05
-1.25
LHK9
70.65
-0.55
LCQ9
81.025
-1.50
FCQ9
95.85
-1.05
LHM9
70.975
-0.425
 
Index
94.09
+0.98
Index
57.14
+0.23
 
 
Live Cattle: 
 
Live cattle closed lower on the day on moderate volume. Outside financial markets put pressure on cattle futures early. If the stock indexes have run out of steam and turn south than cattle will have trouble posting any rallies. The snowstorms have looked to benefit the packer as less animals being slaughtered should boost poor performing beef prices, while backing up marketing into this week. The slaughter was at 122,000 while Saturday’s slaughter was revised to 6,000 and Fridays as well to 86,000. Midday wholesale beef was higher while the spread between choice and select remained inverted. This is a negative sign yet we imagine seeing recovery this week. There was no cash trade this afternoon with virtually no bids while asking prices are solidly around the 86.00 level. Inquiry is very light to start the week in terms of live cattle yet trade is expected later in the week. Expectations are for live prices to remain steady lower. 
 
Current fundamentals do not point to sharply higher markets (especially April), yet this outlook is slowly changing. June and August appear to be stronger markets moving forward. 
 
Boxed Beef Cutout Values
Choice
Select
Loads
134.08
+0.50
134.58
+0.41
188
Choice/Select spread settled at –0.50
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
122,000
116,000
125,000
 
 

 
Feeder Cattle: 
 
Feeder cattle closed lower seeing pressure from live cattle and sharply lower financial markets. The stock market weakness was obvious pressure on feeders before the open. Many analysts are viewing the financial markets as still in a bear market. This outlook will continue to pressure feeders due to economic concerns. The concerning factor for feeders was the poor close. This may bring follow through selling if cash cattle trade is not supportive this week. The CME index is now at nearly a $2 premium to front month April and should prevent further major breaks this week. Futures continue to trade within a range and seem more technical lately than fundamental. 
 
Lean Hogs: 
 
Direct hog markets were mixed with the IA/So.MN direct market at $57.00 down .04; Western cornbelt $57.37 up .15; Eastern cornbelt $54.85 up .44; and the National average at $56.28 up .08. 
 
Pork Carcass Cutout Values
 
 
Loads
57.68
+0.14
43.8
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
422,000
422,000
420,000
 
 
 
  • Hogs and Pigs report released last Friday
 
 
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 mixed on the day on moderate volume. There was not a sharp reaction to the hog and pig report, yet the market did react bearish. The summer months saw the most pressure as the premiums seem too high amongst all the bearish news. Locals decided to liquidate from long positions in the deferred and summer months yet April was supported by short covering later in the day. The slaughter was at 422,000 while Saturday’s slaughter was revised to 94,000. The cutout was released showing gains in loins to support the carcass average. Cutout settled at 57.68 up 0.14. Cash hogs are just called steady for tomorrow while futures are called steady weak.

I believe the report to be neutral to bearish.

 
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. 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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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.