April Hogs to new contract highs- Beef weekly sales volume slows

Published on: 20:57PM Jan 09, 2011

 

CME Feeder Cattle
CME Lean Hogs
Feb
106.37
-0.35
Jan
121.60
-0.32
Feb
79.42
-0.35
Apr
110.55
-0.25
Mch
122.75
-0.32
Apr
84.05
-0.05
Jun
108.40
-0.20
Apr
123.20
-0.62
Jun
91.70
-0.20
 
Index
123.38
+0.21
Index
72.63
0.24
 
 
Live Cattle:
 
FOA food index pushed to NEW WORLD RECORD
 
Drop NEW HIGH 12.67
Cash trades 1.00 lower for the week
 
 
 
Midday beef Ch 165.87 (-0.43); Sel 160.14 (-0.44) 82 lds
 
 
 
Live Cattle:Cattle settle lower as concerns over domestic demand and pressure from rebalancing left the bulls on the side lines. Packer margins continue to balance @ BE to negative, weekly slaughter show slight drop from per holiday pace. Choice/select spread has narrowed to 5.81; Drop Credit pushes to new high @ 12.67. Roll over and rebalancing is now in full swing. Friday's Open interest +1214 contracts, @ 334097; Feb/April rolled 9870 contracts. By Wed April should become lead OI month. Box beef volume for the week Est. @ 931 vs 1325 ya. down 30%. Cash basis holding historical level with Southern plains small discount; northern plans approx. -2.00.
yr.
Looking Ahead:New contract highs finished 2010, which has set a high bar for the start of 2011, Weekly futures action brought the basis back in line for this time of yr. Fundamental trade has focused on this week's slow box beef data and softer prices sighting concerns domestic demand (89-90% of weekly demand) cannot support Beef in the mid 160's at this time. Cash trade this week is expected to be steady weak as packer inventory is holding. With packer margins hovering at or near the RED has the market expecting slower chain speed. Export demand has been outstanding and will be a major factor if slower domestic demand develops. Bottom line, baring severe weather look for softer market this week and a test to the 40 day MA this week. Long term the trend remains up and next Wed grain S&D report will factor into the trend for Jan.   
 

 

USDA Boxed Beef Cutout Values
Choice
Select
Loads
165.83
-0.47
160.02
-0.56
154
Choice/Select spread @ 5.81
Drop Cr**
12.67 (+0.10)
Slaughter
Last wk
Yr Ago
WTD
Yr Ago
120,000
50,000
110,000
639,000
647,000

 

 
** Basis Steer and Heifers
* Prior days Information
 
FEEDER CATTLE:
 
Feeding Margins IMPROVED !!
WINTER Weather forecasted for KS, NE
 
Cash feeder markets have re-open and prices finished the week out up 2-5.00 higher form mid Dec. markets. Depending upon yard conditions following this weekend's weather will be a key driver for sale barn activity. Lower corn and higher differed fats  have greatly improved feeding margins this week. Overall trend is up as total available feeders remains very tight as US cow herd tightens. Dec placements should be skewed toward light weights. Yard conditions across the Midwest will have the greatest impact on this week's prices. Though feeding margins have improved and are now nearing BE levels 6.00 plus corn should have buyers adjusting bids before placing light weights into poor conditions. CFTC Commitment of Traders indicated funds added 905 contracts and has pushed IO up 90% form Nov. lows (approx 18000 contract). A test to the 40 day looks a long way off @ 119.50 but stranger things have happened, particularly if next Wed (1/12) USDA S&D report is bullish corn. 
 
 
* Prior days Information
 

 

USDA Pork Carcass Cutout Values
Load vol.
Cutout
78.55
+0.41
57.50
Slaughter
Wk Ago
Yr Ago
WTD
Yr ago
416,000
279,000
345,000
2189,000
2097,000
National Live Trade Wtd. Px
Net*
Vol.
National
70.52
-0.44
8363
IA/Minn
70.67
-1.07
4700
W. Cornbelt
70.52
-0.91
5521
E. Cornbelt
70.52
+0.23
2842

 

 
* net is based upon HG 200 report "National Direct Prior Day"
 
Lean Hogs
 
 
New contract highs on the week for April forward
 
Lean Hogs- Feb hogs finished the week dn 0.32 @ 79.32, and near Sept highs on the weekly charts. April forward posted new contract highs and higher on the week. Hog weights continue to run 4-6 above YA levels. Weekly slaughter remain strong, and in line with expected slaughter levels. Pork Values pushed higher for most cuts except Hams, reported volumes were very good. Roll over rebalancing shifted 5496 contracts Friday, putting April just shy of the lead OI month, over OI was off 1736 contracts @ 210,709; up 3000 contract for the week, CFTC Commitment of traders indicated Swap deals and managed fund strong buyers for the week ending Tuesday 1/4/11. Managed funds purchased 3600 contracts covering shorts and adding to longs. Will product values and volume be able to maintain higher values as Feb futures approach spot month? Packer margins have been well in the black since May 2010; however when we look 3 weeks ahead packer margins pencil either side of BE. Weekly weight remain above YA. Can domestic clearance support product values above 80.00 this time of yr without slower chain speeds? Are spring futures indicating a marketing whole? Certainly a lot will happen this quarter. Wednesday S&D data will be an important to watch for exports trends and improving Asian markets.  
 
Looking Ahead:  million dollar question remains unanswered- for the first time in 7 months packer margins are approaching BE levels; We know positive packer margins will be maintained; is demand stout enough in the first quarter to support cutout values normally seen in late spring/summer? Technically futures held mid level support this week, a test back to 83.00 Basis April can be expected. breaks should be bought as new contract highs, building OI are exceptionally strong indicators the trend is still higher. Packer margins, chain speed, and poor export data will be key indicator for a shift in trend. Until then look for breaks to buy in Feb and April. Fresh investment money flow can be a make an impact against April and June contracts. Look to buy breaks against key MA numbers. (Apr 18 day @ 81.30)
 
 
Please give us a call, or click Paul Nelson to become part of an elite ag risk management team.
 
Best regards,
Paul Nelson
 
866-433-4371 Toll Free
141 West Jackson Blvd.
Suite 1520A
Chicago, IL 60604
 
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger, Paul Nelson, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold EHedger, Paul Nelson harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.