Friendly Cattle on Feed Report; future demand remains in question

Published on: 16:50PM Nov 21, 2008
 
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Live Cattle
Feeder Cattle
Lean Hogs
LCZ8
84.900
-0.900
FCX8
94.800
-0.775
LHZ8
56.875
+0.075
LCG9
85.500
-1.025
FCF9
89.400
-0.350
LHG9
64.100
-0.575
LCJ9
86.825
-0.625
FCH9
90.150
-0.200
LHJ9
70.525
-0.725
 
Index
94.46
-1.05
Index
52.52
-0.21
 
Live Cattle: 
  • TX and KS trade $88 live, CO trades $87 and IA trades $86.50
  • COF Report released today: COF down 7%
    • On Feed 93 (estimate 93.9)
    • Place in Oct 89 (estimate 91.1)
    • Marketed in Oct 97 (estimate 95.1)
Live cattle closed lower on the day on moderate to active volume. Cattle opened lower on account of further liquidation from index funds. Futures firmed up after midday boxed beef was sharply lower on the day with choice at 155.52 down 2.27 and select at 145.13 down 1.02. Load count was moderate. Live traded sharply lower at 86.50 in Iowa keeping futures weak yet trades in the Panhandle and Kansas at 88.00 and 87.00 in Colorado. This supported a slight rally midday yet the buying was very light. Technical formations are trending higher yet fundamentals have shown weakness over the past two days. The slaughter was at 124,000 with a Saturday slaughter of 18,000. This gives an impressive weekly total of 633,000 head. In the past, funds have stepped in and bought the sharp breaks we have been experiencing. This year, however, they have been liquidating instead of buying due to the financial market fallout.
 
Looking Ahead: The COF report was released today and was down 7%. COF appears to be friendly based on fewer cattle on feed and again proving tighter supplies moving forward. The estimates were generally close so there shouldn’t be a violent response yet we are calling futures 50-100 higher. The state of cattle futures right now is erratic and on rallies producers should consider protection through the form of options strategies because of uncertainty of demand.
 
Boxed Beef Cutout Values
Choice
Select
Loads
156.10
-1.69
145.23
-0.92
243
Choice/Select spread settled at 10.87   +$.52
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
124,000
120,000
126,000
615,000
519,000
 
Feeder Cattle: 
 
Feeder cattle closed lower on the day on account of the weakness of live cattle and the index. Volume was moderate yet trade was quiet. The CME index closed at 94.46 down 1.05. The extreme volatility is making the thin feeder market trade in extreme ranges. Next week, feeders will continue to follow live cattle and the stock market with corn continuing to have little influence on the direction of feeders. This will change at some point, but it does not appear to be in the immediate future.
 
 
Lean Hogs: 
Terminal market hogs were steady trading $32.50-$36.  Direct hog markets were mixed with the IA/So.MN direct market at $50.12 down $.27, Western cornbelt $50.41 down $.01, Eastern cornbelt $48.92 up $.71 and the National average at $49.75 up $.05. 
 
Lean hogs closed mixed with strength in the December yet weakness on back. Volume was light as trade has been difficult lately. Strength from the cutout was perpetuated in the December and with cash called steady for Monday, traders took profits on spreads through out the day. The slaughter was at 431,000 with a Saturday kill of 193,000 giving a WTD of 2,366,000.   The cutout closed at 56.49 down 0.18. 

Looking Ahead. Seasonally, we might be at our lows but we are holding caution given the recent break in cattle and the poor cash prices. This leaves deferred contracts holding large premiums that could be reduced. Therefore, re-consider bear spreads, especially using the Dec contract. Keep an eye on the US dollar.
 
Pork Carcass Cutout Values
 
 
Loads
56.49
-0.18
30.5
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
431,000
435,000
418,000
2.173 m
1.706 m
 
 
 
 
 
  
 
 
 
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