Livestock Outlook 1/23/2009

Published on: 17:56PM Jan 26, 2009
 
(866) 433-4371         [email protected]
 
 
 Livestock Settlements
 
Live Cattle: 
 
Today’s Cattle On Feed report
  • On feed Jan 1st             93        estimate 94 (93.3-95.6)
  • Placements in Dec        97        estimate 100.6 (96-108.2)
  • Marketing in Dec          102      estimate 100.4 (96-110.7)
The actual numbers were relatively close to estimates without any major surprises. The cattle on feed report was down 7% (no big shock), but placements coming in towards the lower end of estimates makes this report friendly. Given that producers struggling with prices they are staying current on marketings so the likelihood of cattle getting backed up in the future looks unlikely from this report. 
 
Live cattle closed higher on the day on an unprecedented upward swing. Futures opened lower on the day due to the cash trade at 82.00 yesterday as well as the lower stock market. Funds and locals were active sellers on a moderate volume open yet midday cattle rallied back making new daily highs coincidentally enough when the stock market began to show signs of improvement. The cold storage report was released yesterday showing red meat supplies up 4% from the previous month and up 10% from last year. Midday boxed beef was mixed with choice at 148.19 down 1.46 and select 143.86 up 0.32. Despite coming back strongly and a friendly Cattle of Feed Report we do not believe that futures will be sharply higher come Monday. The strength or weakness of financial markets will still be looming over our market for some time.
Hold Long April, short June. We are looking for April to hold the premium over June and will risk towards an April discount.
 
 Beef Cutout
 
Feeder Cattle: 
 
Feeder cattle once again closed higher on the day with a late push taking futures from negative to positive territory. Feeders were following the lower live cattle, higher corn market, and financial markets near contract lows. Even with a friendly Cattle on Feed report, for now feeders appear to be in a trading range finding support on breaks, especially March between $90-91. A close below this level would be technically negative, yet we continue to maintain higher outlooks for feeders for the rest of the year.
It is hard to justify higher feeder prices until live cattle prices start uptrending. Since the middle of December feeder prices have staged a bigger price recovery vs. live cattle prices. Boxed beef has been encouraging, but new lows in financial markets will outweigh ideas of less beef in the future. Resistance for the rest of the week will be at this week’s gap lower.
 
 
Lean Hogs: 
 
Direct hog markets were higher with the IA/So.MN direct market at $60.35 up $.53, Western cornbelt $60.47 up $.63 Eastern cornbelt $54.35 down $.04 and the National average at $58.50 up $.92.
 
Pork Cutout
 
Lean hogs closed lower to finish the week making new contract lows in June. Volume was moderate with sellers following the Globex markets on the open. Speculators have not been convinced that hogs will hold after the release of the cold storage report showing frozen pork supplies up 7% from last month and up 20% last year. Cutout closed lower at 57.81 down 0.31 with weakness stemming from loins yet bellies remained unchanged. We expect futures to follow the recent trend lower for Monday. Most outlooks at this point remain mixed, as many traders do not want to risk large positions amid the choppy market, yet a close into new lows is certainly negative.
 
 
Go to www.ehedger.com for a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account. 
 
You can also contact us at 866-433-4371, or by sending us an email to [email protected]
 
 
Regards,
EHedger LLC
141 West Jackson Blvd.
Suite 1520A
Chicago, IL 60604
1-866-433-4371 Office
 
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.