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EHedger Livestock Commentary 8/11/09

Published on: 17:06PM Aug 11, 2009
 
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Live Cattle
Feeder Cattle
Lean Hogs
LCQ9
83.30
+0.025
FCQ9
100.10
-0.325
LHQ9
48.175
-0.125
LCV9
87.55
-0.60
FCU9
99.975
-0.325
LHV9
44.35
-0.65
LCZ9
87.55
-0.60
FCV9
100.10
-0.525
LHZ9
44.20
-0.40
 
Index
100.82
-0.31
Index
53.11
-0.10
 
 
Live Cattle: 
 
Live cattle closed lower on the day. Futures traded firmly the majority of the day, but were unable to hold the higher markets and closed at session lows. The selling was related to financial markets that have been a supporting factor for higher markets. In addition, technical trade led down the market as futures traded below the 100-day moving average (October’s 100-day is 88.30). The fear for cattle futures continues to be the weak hog market. If we see another leg lower in lean hogs it looks like cattle can retest the bottom of the trading range towards $85 in Oct and Dec. Midday wholesale beef prices were higher with choice at 142.01 up 1.16 and select was at 134.46 up 0.48. 
 
Tight cattle supplies continue to the supporting factor, but October’s premium over cash will make rallies into news highs difficult for the near future. Concerns over beef prices are the main bearish issue although this doesn’t appear extremely bad considering the events in the hog market. October cattle will be competing against very cheap pork values. Hogs need to find a bottom in order for cattle to work towards the upper end of the range.
 
Boxed Beef Cutout Values
Choice
Select
Loads
141.62
+0.75
134.03
+0.05
250
Choice/Select spread settled at +7.59
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
127,000
127,000
128,000
251,000
256,000

 
Feeder Cattle: 
 
Feeders closed lower on the day. The feeder market experienced the same turnaround that was seen in live cattle. Corn was flat so today’s direction was influenced by live cattle and concerns over beef demand. Looking forward this week, Wednesday USDA supply/demand report will be very important as to corn’s direction and thus price action in feeder cattle. The average trade guess has corn yields at 157.1 bu/ac. A bullish report and feeders could see a sell off with technical assistance pushing feeders back under $100. A bearish report (which we favor) feeders will look to hold above $100 and form a bottom.  
 
Lean Hogs: 
 
Direct hog markets were lower with the IA/So.MN direct market at $45.55 down .56; Western cornbelt $46.10 down .15; Eastern cornbelt $44.95 down .90; and the National average at $45.60 down .57
 
Pork Carcass Cutout Values
 
 
Loads
55.60
-1.05
156.63
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
428,000
422,000
426,000
851,000
848,000
 
  • Pork cutout; loins -2.75, hams –0.79 (44.43)
  • Monday hog slaughter revised to 423,000 (+ 4,000)
 
Lean hogs closed lower on the day. It was a very disappointing close considering yesterday’s $2 higher pork cutout. Futures opened higher, but began work lower as the cutout was not enough to stop the market from settling at new lows yet again. The weakness came from cash hogs, which have continued to fall in price. Packers have positive margins, but are being flooded with hogs coming to market as producers try and liquidate. This is evident in the upward revision of yesterday’s slaughter and the fact that this week’s slaughter is outpacing year ago levels. The fact that the slaughter has picked up is encouraging for longer outlooks, but presenting an oversupply of hogs in the near term. Yesterday and today appear to have been consolidation and some short covering as open interest decreased, yet the same bearish fundamentals remain. In order for today’s strength to continue we needed a second day of higher cutout values, but this did not happen. The lower cutout will push futures lower on tomorrow’s open.
 
 
 
 
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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.