EHedger Livestock Commentary 8/25/09

Published on: 17:26PM Aug 25, 2009

 

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Live Cattle

Feeder Cattle

Lean Hogs

LCQ9

85.45

+0.275

FCQ9

99.95

-0.15

LHV9

48.30

+1.775

LCV9

88.75

-0.05

FCU9

99.975

-0.35

LHZ9

47.30

+1.30

LCZ9

88.475

+0.25

FCV9

100.125

-0.325

LHG0

53.075

+1.025

 

Index

99.95

-0.15

Index

48.30

+1.475

 

 

Live Cattle: 

 

  • Cattle on Feed Report released Friday

          • USDA                        Estimates

    • On feed Aug 1                 98                       96.6

    • Placements in July           113                     107.3

    • Marketings in July            95                        95.1

 

Live cattle closed mixed today.  Futures saw a mixed performance with initial pressure on the open from a bearish cattle on feed report, yet buying quickly surfaced and took futures higher on the day.  This week I expect a continuation of cattle’s trading range.  Resistance in October still looks to be 89 and then 89.50.  Support looks to be the 100-day moving average just below 88.50.  Currently there is no clear direction on which side October will break out.  Tight supplies should eventually take cattle higher, yet October is already holding a sizeable premium to the cash market.

 

The cattle on feed report was bearish.  On feed numbers and placements were at the high end of estimates.  These numbers suggest that cattle work towards the bottom of the trading range towards $85 in Oct and Dec.  The higher on feed number tells us more beef will be available, especially with weights.  Also, the tight supply issue will not be as big a concern with the higher placement figure.  This week’s cash direction looks to play a big role on futures price.

 

 

August goes off board on Monday, market closed mixed steady to firm cash this week expected.

 

Boxed Beef Cutout Values

Choice

Select

Loads

143.73

+0.70

136.99

+1.13

206

Choice/Select spread settled at +6.74

Slaughter

Wk Ago

Yr Ago

WTD

Yr Ago

128,000

128,000

128,000

254,000

255,000


 

Feeder Cattle: 

 

Feeders closed lower as the day. Grain prices reversed midday to sharply lower but didn’t result in much of a reaction by the Feeders. Futures continue to hold steady around $100.  The CME index is providing support.  August futures expire 8/27, yet feeder cattle futures remain mostly flat across the different contract months.  Currently we are at the low end of a trading range, baring any problems with corn production.

 

 

 

Lean Hogs: 

 

Direct hog markets were lower with the IA/So.MN direct market at $45.73 down .73; Western cornbelt $45.81 down .85; Eastern cornbelt $43.91 up .01; and the National average at $45.43 down .34

 

Pork Carcass Cutout Values

 

 

Loads

56.37

+2.51

33.3

Slaughter

Wk Ago

Yr Ago

WTD

Yr Ago

422,000

430,000

432,000

843,000

864,000

 

 

Lean hogs closed firm across the board today.  Hogs opened higher and stayed firm through the close.  The market was led higher by the nearby contracts off rumors of seasonal ham rumors materializing as well as Friday’s strong pork cutout.

 

The sentiment is changing in the hog market, yet seasonal patterns suggest that prices could still move lower.  In order for prices to continue to move higher, demand needs to increase and show that the huge supply is being used.  Pork production has been extremely large with the slaughter numbers and heavy weights.  The margins are key and need to remain in the black, weights will continue to run above year ago heading into late fall, 2.2 million weekly slaughter will likely continue; will the product market be able to clear this production at the current cut out.  Today was the first trading day we did not settle the Oct Futures at a discount to the Index, but gains beyond this level will still remain selling opportunities for now.  Gains could extend to $50, but will meet stiff resistance with the CME index at 48.30.   

 

 

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Regards,

EHedger LLC

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www.EHedger.com

 

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.