Higher cattle, yet lower hogs

Published on: 18:22PM Jan 13, 2009
 
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Live Cattle
Feeder Cattle
Lean Hogs
LCG9
84.075
+1.175
FCF9
96.350
+1.150
LHG9
61.450
-0.025
LCJ9
87.575
+1.075
FCH9
94.900
+1.575
LHJ9
67.275
-0.200
LCM9
86.000
+0.550
FCJ9
96.450
+1.375
LHK9
78.825
-0.175
 
Index
96.59
+0.11
Index
55.23
+1.12
 
Live Cattle: 
 
Live cattle closed higher on the day on account of a slight short covering rally and weather premium being added into the market. Midday boxed beef was higher on the day adding to the strength. Choice was at 148.99 up 1.39 and select was at 141.45 up 1.99. This was a big move for boxed beef early in the day. If beef prices continue to improve this week than packers could justify paying better cash cattle prices than last week. Yet, I do not believe any packers will chase the market much higher, however, we should see at least steady prices. Cash did not trade today for live yet the talk is of steady better.
 
With new feed outlooks projecting lower levels this looks to be a good area to remove our bear spreads. There still remains a concern over beef demand in the current economy, yet boxed beef has been encouraging. Deferred contracts should trend lower with weaker corn, but still have the underlying factor of tight cattle supplies. Therefore, be near term sellers, but look to be a buyer if we approach previous lows over the next several weeks. Hold Long April, short June. We are looking for April to hold the premium over June and will risk towards an April discount. Call a broker to discuss.
 
Boxed Beef Cutout Values
Choice
Select
Loads
149.26
+1.66
141.93
+2.47
272
Choice/Select spread settled at 7.33
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
126,000
126,000
127,000
245,000
256,000

 
Feeder Cattle: 
 
Feeder cattle closed higher again as discussed due to lower corn and strong boxed beef which led to higher live cattle. An uptrend is trying to from which could take March and April feeders into our pivotal area near $100. Lower corn and better live cattle has led to a rally in feeders so far this week, yet this rally needs to still be questioned.   Long-term outlooks are still look positive, but near term this area looks to be a good area for producers to establish puts in March and April contracts. 
 
Lean Hogs: 
 
Direct hog markets were higher with the IA/So.MN direct market at $58.94 up $.65, Western cornbelt $58.94 up $.65, Eastern cornbelt $53.92 up $.99 and the National average at $57.23 up $.85.
 
Lean hogs closed just slightly lower on the day. Overnight trade was mixed and choppy due to the higher cutout coming into the session. Yesterday’s slaughter was revised to 419,000 from 431,000 showing a weak production total thus far into the week. The cutout settled at 57.85 down 1.08 with the majority of weakness stemming from the ham market. 
 
Bottom line: The futures still maintain large premiums over the cash market, and futures have broke recently. Commercial buying entering the market has been a signal for cash prices to start firming up. 4 out of the last 5 years the beginning of the year has sparked a general buying theme in hogs. Yet, for now it appears that hogs could make new lows before a move such as this occurs. Fundamentally, there still remains a lot of uncertainties but hog numbers will be down overall for the year.
 
 
Pork Carcass Cutout Values
 
 
Loads
57.85
-1.08
131.5
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
431,000
437,000
425,000
850,000
425,000
 
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Regards,
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.