EHedger Livestock Commentary 7/27/09

Published on: 16:56PM Jul 27, 2009
 
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Live Cattle
Feeder Cattle
Lean Hogs
LCQ9
84.70
+0.175
FCQ9
102.40
-0.15
LHQ9
59.175
+0.125
LCV9
90.20
+0.45
FCU9
102.35
Unch
LHV9
54.75
+0.175
LCZ9
89.90
+0.40
FCV9
102.575
-0.175
LHZ9
54.05
-0.325
 
Index
101.59
+0.42
Index
60.38
+0.29
 
 
Live Cattle: 
 
  • Cattle on Feed report Friday
            • USDA                        Estimates
    • On feed in July                             95                               95.2
    • Placed in June                             92                               92.9                       
    • Marketed in June                       101                               99.4                       
 
Live cattle closed higher on the day.  Cattle opened weak and traded lower the majority of the day as sharply lower hogs kept buyers on the sidelines. However, cattle futures managed to rally into the close holding support levels. The cattle on feed report showed no major surprises as the USDA numbers were near pre-report estimates. While expected the report once again highlighted the tight cattle numbers. Midday boxed beef was higher with Choice at 143.82 up .97 and Select at 137.45 up .74. A higher boxed beef market along with smaller showlists will encourage producers to look for higher cash prices this week. This seems reasonable, as packer margins appear to be positive at this time. Still expect a sideways path in futures this week, however, today’s lows look to hold this week as long as fundamental news remains broadly supportive. 
 
 
Boxed Beef Cutout Values
Choice
Select
Loads
142.85
-0.20
136.71
-0.03
174
Choice/Select spread settled at +6.14
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
125,000
124,000
126,000
 
 
               
 
Feeder Cattle: 
 
Feeders closed slightly lower on the day. Futures once again traded right to our first support areas before finding relief and nearly finishing higher on the day. The late strength in live cattle fueled today’s turnaround. Good pasture conditions throughout the country will allow stocker and feeder producers to keep cattle on grass rather than pushing them into feedyards. This should keep underlying support in the feeder market. The cash index is catching up, but still at a discount. Until we see this narrow do not expect futures to post significant rallies.  
 
Lean Hogs: 
 
Direct hog markets were mixed with the IA/So.MN direct market at $57.05 up .08; Western cornbelt $57.15 down .36; Eastern cornbelt $56.43 down .78; and the National average at $56.90 down .50
 
Pork Carcass Cutout Values
 
 
Loads
64.15
-0.85
59.4
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
418,000
356,000
419,000
 
 
 
  • Pork cutout; loins -.26, hams –1.65
 
Lean hogs closed mixed. Hogs traded weak on follow through selling from Friday’s poor close. In fact, futures traded over $1 lower, but managed to rally into the close. The Aug discount to the cash index brought buyers to the market, as this discount has not existed for a significant time. Today’s action supported a reversal action, but this will be difficult to achieve with today’s lower pork cutout. With current cash values it appears that August will expire between $56-61 on August 14th. Now the questions remains, can hogs form a double bottom? The cooler weather and cheaper corn will not help the situation as hog weights showed gains. It looks a little early to call this as downward pressure still looks to be favored in hogs moving forward. 
 
Seasonally hog slaughter should begin to pick up and with positive packer margins plants will want to slaughter as many hogs as possible. The question is if the slaughter begins to average above 2 million hogs weekly can the pork cutout handle this extra production? Well it appears that answer is NO. The weekly slaughter last week was 2.030 million hogs and futures are back at contract lows.  
 
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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.