Financial Rally spills into livestock futures

Published on: 15:39PM Oct 13, 2008


 
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Live Cattle
Feeder Cattle
Lean Hogs
LCV8
91.00
+1.875
FCV8
96.95
+1.50
LHV8
65.975
-0.025
LCZ8
93.00
+1.70
FCX8
96.175
+1.125
LHZ8
61.10
+1.225
LCG9
93.45
+1.625
FCF9
96.825
+1.775
LHG9
66.525
+1.55
 
Index
97.30
-3.55
Index
68.98
-3.23
 
Live Cattle: 
·         Dow sharply higher – settles +936 higher with most gains late
Live cattle closed sharply higher and nearly touched limit midday. Last Friday the limit down losses was attributed to the sharp losses in the Dow index; today the opposite occurred. Futures opened sharply higher with locals and speculators covering short positions. Fund buying was aggressive early yet volume was only moderate. Financial markets were trading higher and encouraging buying in the livestock markets. Choice boxed beef was at 149.13 down 0.38 while select was at 141.33 down 1.91. No slaughter numbers have been released at the time of this writing yet we speculate it will be released by tomorrow morning. 
Live cattle prices this week are expected to be steady, around $92. If the financial markets stabilize and push higher cattle prices may do so as well. We still feel like end of the year numbers will be tight, however, bearish news continues to fall on the market. The general concern still lies in the ideas of decreased meat demand because of global economy slow downs. Tight credit will be an on going concern and a benefit creating tight numbers and higher prices in the spring. Dow index trades sharply higher on close (+936) and is giving a bullish bias in after hours Globex trading! If strength in equities continues look for strength in live cattle futures until cash trades this week. 
 
 
Boxed Beef Cutout Values
Choice
Select
Loads
149.08
-0.43
141.23
-2.01
181
Choice/Select spread settled at 8.84 +$1.58
 
Feeder Cattle: 
 
Feeder cattle opened nearly limit up and closed today with triple digit gains. Feeders took note this morning of higher overnight grain prices and a sharply higher Dow index. As mentioned last week cattle have been looking towards financial markets to determine meat demand in the future in the current economy. Today’s sharply higher financial increase was supportive to oversold feeder futures trading at a discount to the CME index. However, last week did bring some bearish live cattle cash trades and this prompted longs to take money and wait to see this week’s fundamental news. Dow index trades sharply higher on close (+936) and is giving a bullish bias in after hours Globex trading! If financial markets can turn back higher and hold consecutive gains this will give many buyers a reason to get long this market once again. In addition, the CME index settled under $100. This is its lowest level this year since January 22 when it settled at 97.16. Start looking to be a buyer in this market on future breaks.
 
 
 
Lean Hogs: 
Terminal market hogs were steady to $1 lower with prices at $41-$44. Direct hog markets were lower with the IA/So.MN direct market at $61.44 down $2.53, Western cornbelt $61.81 down $2.14, Eastern cornbelt $60.59 down $.98 and the National average at $61.45 down $1.66.
 
  • Oct expiration tomorrow
Lean hogs generally higher on moderate volume. Trade was slow this morning yet the strength was reflective of the financial markets recovery. Cutout settled lower on Friday and lower again this afternoon. October hogs expire tomorrow, which is also a factor as to why October closed lower, and every other month closed higher. No slaughter numbers have been released by the USDA yet they should be out by the open.   The cutout closed only 0.05 lower at 68.53. Global economic concerns and slow downs will be an on going influence toward the premiums in the 2009 contracts.
Looking Ahead: Hogs are called mixed for tomorrow. Hogs will continue to look closely at the financial markets, which traded sharply higher late in the session. However, cash news has been bearish given the large slaughter rates. Slaughter is expected to fall below year ago levels, but the argument questions whether this will occur late in 2008 or out into the beginning of 2009.  Oct futures should hold 65.00 as expiration nears. We are looking to sell rallies in the Dec and Feb, because of the falling cash market and financial uncertainties. The discounted future's market is our best sign that lower prices are still coming.
  
 
Pork Carcass Cutout Values
 
 
Loads
68.53
-0.05
50.8
 
 
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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.