Sorry, you need to enable JavaScript to visit this website.

EHedger Livestock Commentary 7/15/09

Published on: 17:07PM Jul 15, 2009
 
(866) 433-4371         info@EHedger.com
 
 
Live Cattle
Feeder Cattle
Lean Hogs
LCQ9
84.925
-0.125
FCQ9
103.05
-0.075
LHN9
58.45
-0.25
LCV9
90.275
+0.15
FCU9
103.20
-0.15
LHQ9
64.025
+0.425
LCZ9
89.95
-0.10
FCV9
103.10
-0.45
LHV9
59.10
+0.15
 
Index
101.36
+0.43
Index
58.96
-0.17
 
 
Live Cattle: 
 
Live cattle closed mixed, mostly trading lower. Futures tried to post a rally with higher outside markets, but sellers were found. Support still stands in Aug at 82.50-83.50, while resistance lies near 85-86-50. Open interest is at its highest level for 2009, but outlooks are mixed as futures looks towards cash for direction this week. The futures rally and historical basis levels suggest that cash prices should trade higher this week. Bids stand at 81, while asking prices are mainly 85. However, technicals are slowing turning negative and corn turned negative late in the day. 
 
One cause of concern reducing some of our bullish outlooks is the current cost of feed ingredients, mainly corn. Prices have been slashed in the past several weeks and margins have improved due to the feed break rather than from higher cattle prices. Yet, the tight supply issue and potential for improved demand are still reasons for bullish outlook.
 
Boxed Beef Cutout Values
Choice
Select
Loads
138.08
-0.06
131.70
+0.34
353
Choice/Select spread settled at +6.37
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
120,000
127,000
118,000
371,000
372,000
               
 
Feeder Cattle: 
 
Feeders closed lower on the day. Feeders were given mixed signals throughout the day. Financial markets were sharply higher providing support, yet live cattle was mixed to lower and corn was higher early. However, corn turned lower for the session and provided some support. Futures are still near contract highs and hold premiums over the CME index, despite the index closing over 100. Traders are beginning to reference tight numbers more often and this will bring buyers on breaks. While the tight cattle numbers are bullish for long-term outlooks do not get impatient, as further rallies will be difficult in the near term. 
 
 
Lean Hogs: 
 
Direct hog markets were higher with the IA/So.MN direct market at $56.90 up 1.02; Western cornbelt $56.78 up .72; Eastern cornbelt $55.50 up 1.00; and the National average at $56.06 up .51
 
Pork Carcass Cutout Values
 
 
Loads
63.33
+3.28
102.1
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
406,000
393,000
412,000
1.167
1.242
 
  • Pork cutout; loins +1.97, hams +5.16
  • IA/MN hog weights 264.9 lbs. vs. 263.2 wk ago and 260.5 yr ago
  • July expires expired today at noon
 
Lean hogs closed higher, except for June futures, which expired today. Today’s major story in hogs was Tyson Foods telling of liquidation plans. Citing poor economic conditions Tyson is selling five hog farms and reducing their sows by 28% over the next 8 to 10 weeks. This amounts to nearly 20,000 sows going to slaughter over the next 8 to 10 weeks. While this number seems large, remember that in April and May sow slaughter was 502,000. This news will support bear spreads and we saw Dec futures be the beneficiary. August has been supported by the newfound strength in the cutout. Today’s cutout numbers will lead to a higher open. However, we continue to monitor the 50-day moving average around 64 as resistance. August is now the front month and is carrying a large premium over the cash market, which watched July trade lower this week. Hog weights today were higher, which should be a sign that hogs are getting backed up as we thought. The reduced slaughter should keep the cutout firm, but this will also keep pressure on cash prices, as more hogs are available. In addition, grains returned to lower markets. Volatility will remain in the hog market and look to sell a sharply higher market tomorrow in Aug as the cutout will inspire early buying. Call to discuss.
 
The US has the cheapest available protein and these low prices appear to be drawing some interest. Exports are a factor that could change quicker than current supply issues. An increase in ham prices is an encouraging sign. Positive news is beginning to surface, while bearish news continues to be the same stories and thus wearing thin. However, do not be surprised to find sellers on strength as futures still hold premiums. With hog liquidation officially occurring bear spreads look to be favored.
 
 
Go to www.ehedger.com/sign-up/  for a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account. 
 
You can also contact us at 866-433-4371, or by sending us an email to info@EHedger.com
 
 
Regards,
EHedger LLC
141 West Jackson Blvd.
Suite 1520A
Chicago, IL 60604
1-866-433-4371 Office
 
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.