Livestock Outlook 3/4/2009

Published on: 16:52PM Mar 05, 2009
 
(866) 433-4371         [email protected]
 
 
Live Cattle
Feeder Cattle
Lean Hogs
LCJ9
84.65
+0.425
FCH9
93.025
+1.05
LHJ9
62.325
+1.475
LCM9
83.05
+0.60
FCJ9
93.85
+1.05
LHK9
71.625
+0.95
LCQ9
83.975
+0.625
FCK9
94.90
+0.575
LHM9
72.75
+0.975
 
Index
91.87
Unch
Index
56.02
 
 
 
Live Cattle: 
 
  • Higher boxed beef values, while lower WTD slaughter
  • No major changes today 
Live cattle closed higher on the day, yet couldn’t break through the higher opening prices. Financial markets shifted overnight from soft to firm and the strength seen in these markets translated into higher cattle gains. This will continue to a major factor in cattle markets for the foreseeable future. Cash trade has been not developed this week (many are expecting $1-2 higher, although we look for trade to be steady) as packers are pulling available contract and formula cattle. Plus, they will not move quickly to pay higher asking prices even though boxed beef has been firm this week and the slaughter is remaining light. Today, resistance near $85.50 held and will continue to pressure prices at this level. Without a higher cash trade this week it will be hard to justify sharp rallies holding unless the stock markets does so.
 
Feb placements estimates should come in close to 100% (bias slightly higher) with marketing's just over 100%. Choice /select spread has made notable recovery from being a discount, but we would like to see this spread widen in line with our season strengths. This will also signal a bullish change in beef demand. Cattle futures will continue to remain sensitive to the outside financial markets and would look for a test back to contract lows with continued negative economic outlooks, yet for now it looks range bound.
 
 
Boxed Beef Cutout Values
Choice
Select
Loads
135.48
+0.66
133.48
+0.56
348
Choice/Select spread settled at +1.99
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
118,000
125,000
125,000
359,000
379,000

 
Feeder Cattle: 
 
Feeder cattle closed higher on the day on light volume with early strength due to fund buyers in the nearby contracts following the trend of the stock market. Similar to live cattle feeders saw their highs right on the open. Prices will have difficultly rallying from this point unless bullish news within live cattle (higher cash prices) surfaces. The dry weather in the plains has forced most of the feeders to move earlier this month, which should lend some support against 89.00 bases the board. Resistance in March and April settled above moving averages around 92.60 (March) and 93.60 (April) and are now testing 50-day averages. 
 
Longer term the reduction in cattle numbers have built a bullish scenario, but lets not move too quickly too fast. The index strength has faded and financials still have concerns about the “stimulus package” leaving feeders in a tough position. Feed yard profitability remains very poor and we need to restart an uptrend in live cattle prices before feeders are ready to break out of the next resistance level. 
 
 
Lean Hogs: 
 
Direct hog markets were higher with the IA/So.MN direct market at $59.13 up 2.25; Western cornbelt $59.00 up 1.88; Eastern cornbelt $54.90 up 1.47; and the National average at $57.76 up 1.76. 
 
Pork Carcass Cutout Values
 
 
Loads
56.26
-0.66
116.6
Slaughter
Wk Ago
Yr Ago
WTD
Yr Ago
429,000
429,000
430,000
1.275
1.283
 
  • IA/MN hog weights 267.5 lbs vs. 267.4 wk ago and 267.3 yr ago
  • Cutout lower: strength in loins +1.32, weakness in hams –2.42
Lean hogs closed higher on the day from strength in yesterday’s cutout, as well as higher cash prices today. In addition, a bounce higher in the financial markets was friendly. Lean hogs have now posted rallies 5 out of the last 6 days. This continued bounce along with lighter weights today certainly is encouraging for forward outlooks. However, the cutout and recent strength should make for a choppy trade to finish to the week. 
 
We are still early in the game but after almost two years of bear spreading the market ...yes it maybe time to buy LHJ sell LHN. Packer margins are still a problem so caution is still needed. Look to buy lhj-lhn @-13.50; stop protection @ -14.20 on a close only basis; trade exit -12.00. Summer month premiums are still a concern, so either further bear spreads such as lhn-lhv or butterfly long April and Oct and short July or Aug. Call to discuss.
 
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.