Livestock Outlook for 10/20/08

Published on: 17:04PM Oct 21, 2008
 
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Live Cattle
Feeder Cattle
Lean Hogs
LCV8
90.825
-0.225
FCV8
98.65
+0.25
LHZ8
56.25
-0.05
LCZ8
92.075
-0.475
FCX8
98.60
-0.05
LHG9
63.50
+0.45
LCG9
93.15
-0.10
FCF9
97.95
-0.10
LHJ9
69.80
+0.725
 
Index
97.43
+0.12
Index
64.59
-0.81
 
Live Cattle: 
The boxed beef market was higher today with the choice cutout closing $1.07 higher to settle at $145.56 and the select cutout closing $.54 lower to settle at $138.03. There were 217 loads of beef sold. The choice/select spread settled at $7.53 a gain of $.53.
 
  • Financial and Grain Markets firm 
  • COF Report             USDA             Estimates
    • On feed                 95                        95.5
    • Placements            94                            96.6
    • Marketings            107                        106.4
Live cattle closed lower the day. Last Friday's COF report was friendly, yet today did not finish with follow through buying mainly because of the strong gains already seen at the end of last week. Slaughter was raised for last Friday to 124,000, putting the week-to-date for Saturday at 632,000. Today's slaughter was 127,000 head vs. 129,000 yr ago. Boxed beef prices were led higher with choice gaining 1.07. This week's overall showlists are lighter with the biggest decreases in Kansas and the Panhandle. It will be interesting to see if cash trades advance this week due to packer demand. Regardless, the tighter numbers should bring steady to better cash trade. We still believe inventories are tight, we have no control over demand, or the producers need to sell. FAS released Aug export numbers showing huge changes to our balance sheet. The US exported an additional 88,734 million lbs from a year ago while imports were down 57,821,000 vs. a year ago that's a 146,555 net positive change.
Next week will closely look for cash trades and whether packers need to buy cattle or not. If they do cash prices should be higher and futures could jump higher. It is too early to say whether we have seen the bottom because of volatility within financial and commodity markets, but being short cattle this week does not look overly attractive right now.
 
  
Feeder Cattle: 
 
Feeder cattle closed mixed trading both sides of unchanged throughout the day. Last Friday's COF report appeared to have been absorbed into the market already, especially with Thursday and Friday rallies to finish the week. This means that live cash cattle trades and the financial markets will determine this week's direction. I'm not predicting a bottom within the stock market, but signs are pointing to the worst being behind us. The CME index seems to be holding above $97 giving additional encouragement. Prices of feeders are near previous years lows and with the break in corn are allowing those with credit to purchase cattle. Technical indicators are starting to turn and show room for further gains. Yet today's action saw prices peak again at their 15-day moving average, especially in Jan Feeders. Look to own feeders on breaks.
 
 
Lean Hogs: 
Terminal market hogs were steady to lower with prices at $37.50-$41. Direct hog markets were lower with the IA/So.MN direct market at $58.94 down $1.45, Western cornbelt $58.87 down $1.86, Eastern cornbelt $55.88 down $1.26 and the National average at $57.44 down $2.11. The pork carcass cutout was $.29 lower to settle at $64.73 with 45.8 loads of dressed pork sold.
 
Lean hogs closed mixed off continued export demand concerns and a very weak live trade. Today's cutout was down .29 at 64.73; loins were off 1.67, while hams held 46.71. Over all cutout values haven't been this low since last April/May, and all indications are for cutout to drift lower. Rumors of slaughter slow downs circulated the floor this morning as packers are having difficulty-moving product. In most years, the packer would take advantage of the supple by freezing the product. However, this year the packer is working within the same tight credit market and doesn't have the latitude to move as much product into the freezer pushing fresh supply onto the market at the same time exports seem to be decreasing. The slaughter rate will keep pressure on cash fundamentals for the front months. The deferred contracts are still holding premiums on ideas of fewer hogs going forward as Canadian imports remain light and this summers sow reductions. Exports or at least the fear of smaller exports will continue to be a key issue.
Looking Ahead: The news seems like it can't get any worse; today's direct trade was anywhere from 1.25 lower to 2.25 lower and indications for Tuesday are steady lower. Futures are certainly oversold at this point and we would expect to see a bounce in the next few days. Cash news still looks bearish given the large slaughter rates. We remain bearish over all and would like to sell a two-day rally in the Dec and Feb. The discounted future's market is our best sign that lower prices are still coming.
 
 
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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.