EHedger Livestock Commentary 8/27/09

Published on: 17:24PM Aug 27, 2009
 
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Live Cattle
Feeder Cattle
Lean Hogs
LCQ9
85.175
+0.10
FCQ9
99.50
-0.30
LHV9
47.90
+0.85
LCV9
87.575
+0.20
FCU9
98.825
-0.475
LHZ9
46.20
+0.80
LCZ9
87.70
+0.125
FCV9
98.975
-0.50
LHG0
52.675
+0.30
 
Index
99.65
-0.28
Index
49.07
-0.05
 
 
Live Cattle: 
 
·        August expires Monday
·        TX trades $85 live and KS trades $85 live and 134 dressed
·        NE trades $83.50-84 live and 132-133 dressed
·        IA trades $84 live and 131 dressed; CO trades $84-85 live and 132 dressed
 
Live cattle closed slightly higher today. Today’s action was mixed following yesterday’s lower day. Midday boxed beef was lower with Choice at 144.04 down .31 and Select at 136.53 down 0.49.   Cattle were supported by the reversal of outside markets such as crude oil and the stock market. In addition, cash trade reports during pit trading were steady to marginally higher at 83.50-84. However, since the close active cash trade has occurred at $85 live in the Panhandle and Kansas. This has already resulted in a higher Globex cattle trade. The higher cash ($3 higher in 2 weeks) is certainly supportive for cattle feeders, yet Oct futures still hold premiums that have been suppressing strong rallies. With today’s cash trade buyers will be more confidant that current support here at 87-88.50 holds, rather than a test near $85. While cattle futures direction has been unclear today’s cash prices should find enough buyers to begin futures back in an uptrend for the next week. Look to buy cattle, especially on breaks because of tight supplies and higher cash. 
 
Boxed Beef Cutout Values
Choice
Select
Loads
143.71
-0.64
136.34
-0.68
264
Choice/Select spread settled at +7.37
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
129,000
128,000
127,000
509,000
509,000

 
Feeder Cattle: 
 
Feeders closed lower as the day. As mentioned yesterday today’s trade was a function of a technical sell off. It was a second consecutive close under $100 and took October down to our support at 98.50 before finding a mild rebound. 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. Feeder cattle are at risk to see a technical sell off for the remainder of the week. However, feeders may hold some ground and push higher to finish the week strictly due to today’s strong live cattle cash trade.
 
 
Lean Hogs: 
 
Direct hog markets were mixed with the IA/So.MN direct market at $45.63 down .06; Western cornbelt $45.85 down .02; Eastern cornbelt $44.00 up .15; and the National average at $45.14 down .13
 
Pork Carcass Cutout Values
 
 
Loads
58.57
+2.52
48.4
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
426,000
430,000
432,000
1.69
1.731
 
  • Pork cutout; loins -0.43, hams +8.21 (62.56)
  • IA/MN hog weights 267.2 lbs. vs. 267.1 wk ago and 258.3 yr ago
 
Lean hogs closed higher on the day. Hogs continue their trend of higher one day lower the next. October was today’s leader as cash prices have stabilized this week, while the cutout has surged higher. The cutout is being lead by ham prices. In fact, ham prices have nearly doubled from their lows and gained roughly $13 since 8/21. Today’s strong cutout has already led to 0.40-0.60 gains in after hours Globex hog trading. The smaller slaughter pace and improved cutout is the combination hog producers need to see in order for hog prices to continue higher. Since both of these factors are working together it seems that lows may in…….at the very least look to buy breaks. However, can this combination be sustained? The answer may not lie until after Labor Day pork features are over. Both the bulls and the bears seem comfortable with their outlooks from these levels. Gains beyond the CME index will remain selling opportunities for now. Gains could extend to $50, but will meet stiff resistance with the CME index near 49.
 
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.
 
 
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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.