EHedger Livestock Commentary 6/9/09

Published on: 18:06PM Jun 09, 2009
 
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Live Cattle
Feeder Cattle
Lean Hogs
LCM9
80.175
+0.75
FCQ9
96.325
+0.475
LHM9
57.35
-0.225
LCQ9
81.725
+1.10
FCU9
96.95
+0.75
LHN9
58.75
-0.75
LCV9
87.025
+0.725
FCV9
97.50
+0.725
LHQ9
60.525
-1.00
 
Index
98.22
-0.52
Index
58.78
-0.65
 
 
Live Cattle: 
 
Live cattle closed higher on the day on light trade. Today’s strength was a bit surprising for cattle bears as now front month Aug closed slightly over $1 higher. The news remains light as futures wait to see where cash cattle trade this week. The support came from the fact that August has been holding above $80, the bottom end of the trading range. In addition, despite lower boxed beef prices last week movement was positive. Midday wholesale beef prices were higher with choice at 140.49 up 0.80 and select at 133.06 up 0.16. There were no deliveries for June Cattle. 
 
Already there is a lot of discussion concerning the next Cattle on Feed report due out on June 19th. Due to higher corn and tightening credit May placements may be sharply lower. A placement figure in the lower 80 percentile will encourage bear spreading, but Aug/Oct is already at a significant discount. Demand needs to lead the market higher, yet this will be difficult with other cheap proteins. It appears cattle are trying to form a bottom, yet more positive news needs to surface to confirm this. 
 
Boxed Beef Cutout Values
Choice
Select
Loads
140.69
+1.00
133.34
+0.44
304
Choice/Select spread settled at +7.35
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
128,000
126,000
126,000
255,000
252,000
               
 
Feeder Cattle: 
 
Feeder cattle closed higher on the day. Feeders opened higher and then traded lower as corn values took back yesterday’s losses. However, the higher live cattle market managed to bring feeders near their highs on the close. August is roughly $2 below the CME index giving some support, yet cash feeders this week are lower. The feeder market is oversold and due for more of a recovery, but it needs live cattle to lead the way.
 
 
Lean Hogs: 
 
Direct hog markets were lower with the IA/So.MN direct market at $54.55 down 1.01; Western cornbelt $54.96 down .66; Eastern cornbelt $51.93 down .22; and the National average at $53.52 down 1.12
 
Pork Carcass Cutout Values
 
 
Loads
56.63
+0.53
109.8
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
412,000
421,000
408,000
819,000
814,000
 
  • Pork cutout: loins +1.72, hams -.07
 
Lean hogs closed lower on the day. July and Aug contracts made new lows as the futures premium continue to attract sellers. Early in the session hog futures looked supported with the sharply lower dollar, higher cattle, and higher outside markets. However, midday cash hogs were lower once again highlighting the fact that packers are unwilling/unable to pay higher prices for hogs. June looks to hold value as it is below the CME index and expires this Friday. The inverted market for most of 2009 did not give producers an incentive to raise hogs. With hog liquidation occurring the market should build a premium into the deferred contracts.
 
Eventually, cheap pork will find value, but it doesn’t appear we have reached that level as demand is still a major concern. The path of least resistance for the summer months still appears to the downside. 
 
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Regards,
EHedger LLC
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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.