EHedger Livestock Commentary 4/01/09

Published on: 17:56PM Apr 01, 2009
 
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Live Cattle
Feeder Cattle
Lean Hogs
LCJ9
83.775
-0.150
FCJ9
93.300
+0.125
LHJ9
60.150
-0.20
LCM9
81.375
-0.325
FCK9
93.950
-0.300
LHK9
71.600
-0.45
LCQ9
82.350
-0.100
FCQ9
96.825
-0.450
LHM9
71.450
-0.95
 
Index
93.79
-0.09
Index
57.74
+0.28
 
 
Live Cattle: 
 
Live cattle closed lower on the day on moderate volume. Live cattle opened weaker on account of pressure from outside markets. Cash did not trade today due to packers holding out until as late as Friday to buy cattle. This is due to the severe weather cattle regions have experienced that backed up marketings into this week. This gives the upper hand to packers. Bids are at 81 while asking prices are at 86. Yet, midday wholesale beef were higher with the spread between choice and select remaining inverted. Choice was at 135.62 up 0.92 and select was at 136.39 up 0.27. Afternoon boxed beef showed choice/select at even money.
 
Current fundamentals do not point to sharply higher markets in April. First notice date for April futures in April 6th. June and August appear to be stronger markets moving forward.  Look for previous lows in cattle to hold. June cattle appear undervalued in this range and especially under $80. While this market may trade under $80 we are looking for prices to turnaround by the end of the week. Bears are claiming heavy weights, poor beef prices, and backed up cattle to push cattle prices lower. 
 
Boxed Beef Cutout Values
Choice
Select
Loads
135.84
+1.14
135.84
+0.28
304
Choice/Select spread settled at 0.00
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
108,000
122,000
116,000
355,000
367,000
               
 
Feeder Cattle: 
 
Feeder cattle closed mixed with strength in the nearby and weakness in the deferred. Reported higher cash feeders at the Sioux Falls auction supported April. Feeders traded lower for the majority of the day with funds selling early because of weak financial markets, yet small buying surfaced late as the stock market recovered. Futures are close to the middle of the range with May feeders settling just below the 20-day moving average (yesterday settled just above).  
 
Lean Hogs: 
 
Direct hog markets were mixed with the IA/So.MN direct market at $57.35 down .10; Western cornbelt $56.94 down .54; Eastern cornbelt $54.66 up .02; and the National average at $56.23 down .31. 
 
Pork Carcass Cutout Values
 
 
Loads
55.00
-1.69
127.4
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
424,000
424,000
436,000
1,264,000
1,287,000
 
  • USDA announces buying $25 million of pork products
  • IA/MN hog weights 269.5 lbs vs. 269.5 wk ago and 267.8 yr ago
  • Pork cutout –1.69; loins –4.46, hams –1.97
 
Lean hogs turned back lower today on light volume. Spreading was a main feature today, thus causing settlements to be nearly $1 lower to unchanged. Cash was steady today, but needs to start improving to justify the April premium and especially the summer month premiums. Higher cash prices are in question because of pork demand and poor packer margins. The pork cutout settled sharply lower with loins and hams leading the way down. The cutout is now at an even further discount to the CME cash index. (cutout = 55 vs. index = 57.74). Tomorrow the cutout should make for a lower opening in lean hog futures.
 
Yesterday’s buying looks to be a result of two conditions. First the USDA announced that they will purchase up to $25 million of pork products for federal food nutrition assistance programs. These include the National School Lunch Program, the Summer Food Service Program, and the Emergency Food Assistance Program to name a few. Follow this link for the official press release http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB?contentidonly=true&contentid=2009/03/0079.xml Second, the buying also looks to be a result of futures near contract lows attracting some bottom pickers. The announcement by the USDA looks to keep old contract lows holding. Just keep in mind that many factors are still bearish.
 
 
 
 
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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.