Cattle/ Hogs push lower with Corn and Gold

Published on: 18:32PM Jan 04, 2011

 

CME Feeder Cattle
CME Lean Hogs
Feb
106.17
-0.80
Jan
121.00
-0.25
Feb
77.30
-0.67
Apr
110.27
-0.67
Mch
122.40
-0.67
Apr
81.87
-0.67
Jun
108.12
-0.35
Apr
123.40
-0.37
Jun
91.35
-0.52
 
Index
122.44
-1.03
Index
72.06
+0.87
 
 
Live Cattle:
 
 
Cash trades est. volume 71,000
NE105-106.00, 169.00; TX 106-106.50; KS 105-106.00, 167.50; CO 106.50
IA 170.00
 
 
Midday beef Ch 165.92 (+1.71); Sel 159.02 (+1.16)186 lds
 
 
 
Live Cattle:Cattle settle lower as commodity markets across the board trended lower, professional traders have turned negative over concerns beef values are to high to clear domestic demand, which is still 89-90% of the weekly box beef volume. 2010 averaged was 9.4%, the weekly aver have bounced back, Monday's data put exports @ 11.1% of last week's wkly box beef vol. With roll over set to get on its way end of this week and Feb OI @ 144848 contracts liquidation off of contract highs can be expected following the yr end support. Packers hit the market early this week (I guess they are tired of waiting until the end of the month chases cash $$$$$ higher) USDA is est. today's vol. @ 71K  to final   at or near BE levels and will be a key point as the trade looks ahead to Jan and the "Goldman" roll.
Open interest Mon. +1645 contracts, @ 328367
 
Looking Ahead:New contract highs should be respected, we may be over bought, however the trend remains up, which means breaks should be bot. IS this a break to buy? Yes when the April reaches 40 day MA (108.60 area). much of this week's tied to the corn market which is liquidating ahead of next Wed's (1/12) S&D data. Roll over and a breaking corn market should pressure futures lower for a few more days. Today's box beef vol. @ 186 is very low and may be a concern with beef prices up sharply over the last two weeks. Slaughter is running below ya by 10,000 hd. though this is very small change it is the first time on this move higher slaughter is tracking below ya. Final weekly numbers will be the real test. Packers early week purchases is also out of the pattern established last spring/summer-meaning if they get ahead of their buy and slow chain speed they may be able to get the upper hand for the balance of the month. Winter weather will be key...open weather packers win, snow/cold and light marking weights feed yards win. Packer margins have also move into the red and board feeding margins have just bounced off 12 month lows again. bottom line look for further weakness 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
165.92
+1.71
159.02
+1.16
186
Choice/Select spread @ 6.90
Drop Cr**
12.48 (-0.02)
Slaughter
Last wk
Yr Ago
WTD
Yr Ago
127,000
131,000
127,000
243,000
253,000

 

 
** Basis Steer and Heifers
* Prior days Information
 
FEEDER CATTLE:
 
Feeding Margins remain Negative
OK City 2-5.00 higher as pen space has improved
 
Cash feeder markets have re-open and prices are running 2-5.00 higher than two weeks ago. Interest and receipts  were very good as aggressive marketings has open pen space. Board feeding margins have taking another turn back to 12 month lows with modest improvement seen this week. market conditions have changed slightly; for the first time since last spring packer margins have moved into the red. As we just mentioned feeding margins have been in the red since early Dec. The point is if packers slow chain speed the weather remains favorable cattle will back up slowing  buyer interest. Fund interest in Feeder futures 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 bulling corn.  
 
 
* Prior days Information
 

 

USDA Pork Carcass Cutout Values
Load vol.
Cutout
77.46
-0.41
142.63
Slaughter
Wk Ago
Yr Ago
WTD
Yr ago
422,000
428,000
426,000
845,000
850,000
National Live Trade Wtd. Px
Net*
Vol.
National
69.49
-0.41
12450
IA/Minn
69.77
-0.17
7120
W. Cornbelt
69.52
-0.41
7736
E. Cornbelt
69.40
-0.47
4514

 

 
* net is based upon HG 200 report "National Direct Prior Day"
 
Lean Hogs
 
 
Furtures on 9 day low
 
Lean Hogs-settled lower as outside markets traded lower, including corn futures which have been an influence as the "market" tries to maintain profitable feeding margins. Product values continue to hold against strong production numbers in Nov and Dec. It is to early, however this week's slaughter volume, particularly Saturday's volume will interesting to monitored- aggressive numbers good for producers; light numbers will present problems and maybe a sign of softer demand. Softer demand may be hard to imagine with today's explosive product vol. @ 142.63 loads. Carcass weights are off record/recent highs, however they remain above seasonal averages. Roll over will pick up by end of week, open interest remains relatively low (holding 202,000 area) since mid October; compare this to cattle, feeders or Corn. Next Wed. S&D will be our first look official look into Nov demand numbers which will confirm or further confuse the Nov cold storage data.
 
Looking Ahead: Futures have seen quite a break since posting new highs last week, the trend remains up but the 40 Day MA maybe be our next target if today's lows don't hold. Hog weights combined with slower chain speed, and high ration cost could shift pricing power back to the packers.  Items to watch this week, Technical support levels (today's low); weekly slaughter volume, and hog weights. New highs last week and over bought conditions should not be confused with a change of trend. Poor packer margins and lower than expect weekly slaughter could lead to a shift in trend. Technically, the market could be explosive- new highs  open interest levels, add in a little bullish demand fundamental news in next wed S&D report.  Fresh investment money flow can be a huge wild card which would flow against the April and June contracts. Look to buy breaks against key MA numbers. (Apr 18 day @ 81.30)
 
 
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