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Cattle lower off COF/CORN; Hogs Higher, New contract high Feb

Published on: 15:39PM Sep 20, 2010

 

CME Live Cattle
CME Feeder Cattle
CME Lean Hogs
Oct
98.15
-1.25
Sept
110.65
-1.17
Oct
78.52
+0.82
Dec
100.60
-1.35
Oct
110.75
-1.10
Dec
76.77
+0.82
Feb
102.15
-0.85
Nov
110.95
-1.40
Feb
80.37
+0.77
 
Index
111.95
-0.27
Index
83.04
+0.12
 
 
Live Cattle:
 
 
Cash Trades 98.00 TX 3500 hd
 
Midday box beef 156.94 (+0.32) 150.55 (-0.66) 153 lds
Comp Box Beef Exports bounce back 887 lds; 29.3% of wkly volume
 
CORN, Corn, corn- market remains in ration mode
Show list  up 3500 hd; up NE;CO-moderately lower TX; KS
 
Live Cattle: futures settled  lower off bearish COF report, corn. Show list improve  this week lead by NE and CO. Mid day beef prices remain sluggish on moderate volume. Slaughter rates remain good however daily rates have shown more volatility as packer continue to stay "hand-to-month".   In our est. packers are still holding little forward inventory which should lend some support to cash; next wk trade is expected 97.00-95.00; packer margins are positive.
 
Looking Ahead:Packers are heading into next wk once again hand to month on tight inventories. Exports look to be cooling; however month end retail volume should pick up. 2008 gave us some great insight, The market ultimately paid for food over gas. The first thing to do is slow ethanol grind, which the corn market is doing (Ethanol/RBOB moved 1.00 on the wk an additional .50 maybe needed). The next question is how long will this take? I don't Know for the tweeters. We mentioned Friday, placements and marketing's should indicate differed Feb should be the weakest. We still believe the differs will lose particularly if today's corn break follows through. Packer interest should pick up again mid week and Fund Order flow closer to month end.  
 Hedge Recs: Look to cover Oct hedges 95.00 area.
 

 

USDA Boxed Beef Cutout Values
Choice
Select
Loads
156.90
+0.28
150.23
-0.98
254
Choice/Select spread @ 6.67
Drop Cr.
11.06 (+0.01)
Slaughter
Last wk
Yr Ago
WTD
Yr Ago
129,000
130,000
123,000
0
0
 
 
 
 
 

 

 
 
 
 
 
 
 
 
* Prior days quote
 
 Feeder Cattle: 
 
Ok City strs 1-3.00 lower; heifers 2-4.00 lower
 
Settle lower as corn pushed higher early. Sale barn active was lower of COG concerns. Cattle buyer interest is expected to remain locally centered for a few more weeks. Feeders remain caught between tight total supplies and feed yard profitability, which means back end fats will move with corn to pay for protein production. Placing feeders in the position of following differed fats.  We cannot emphasize enough the need to have your corn needs covered. We have adjusted our support level to 111.50-112.00 bases Nov. Sept placements fair? Private sources have them running @ 100% of yr ago. Funds remain aggressive supporters in corn, cattle and hogs, with the 3 rd quarter nearing a close look for a bounce in the differ fats lending support to feeders at current levels.
Continue to keep your feed needs covered
 

 

USDA Pork Carcass Cutout Values
Load vol.
Cutout
91.87
+0.73
39.50
Slaughter
Wk Ago
Yr Ago
WTD
Yr ago
417,000
413,000
427,000
0
0
National Live Trade Wtd. Px
Net
Vol.
National
80.47
+1.21
12481
IA/Minn
81.01
+0.25
4699
W. Cornbelt
80.88
+0.58
4964
E. Cornbelt
80.21
+2.18
7492

 

 
 
 
 
 
 
 
 
 
 
 Lean Hogs: 
 
Open Interest Explodes  New Record high 232782 up 15k contracts on the wk
Quarterly pig crop report Friday 9/24/10 2:00 pm Central
COLD STORAGE report Wednesday 2:00 pm
Daily slaughter remains strong
CUTOUT values higher lead by picnics and loins
 

 

 

 
Lean Hogs- Higher, Feb posted new high, Dec and Oct followed. Funds purchased nearly 15,000 contracts last wk. Oct futures a 4-500 point discount producers seem to be moving hogs timely. The discount has lent underlying support to Oct Paul nelson, agweb, ehedger, ag risk management, elite ag hedgeing; fed cattle. feeder cattle, hogs livestock, USDA cattle on Feed report should confirm record low belly numbers, Private est show total pork around 385million pounds, which would be just above 2004, 383 milloin pounds.
 
Looking Ahead: Seasonal trend to narrow the basis should hold futures early in the week. Packers appear to be well bought for next week. Retail prices hikes are expected after the 1st; which could shift packer interest to "hand-to-mouth" buying as they await consumer reactions. This approach works well when supplies are adequate  but as we have seen in the cattle, when supplies are tight sharp rallies can occur. We remain concerned over wholesale prices softening demand for the 4th and 1st quarters. Demand appears to have been hurt, the discounted market is confirming lower prices ahead, however tight inventories, packer profitability, and aggressive fund buying should be supportive. Continue to buy 250-300 pt breaks.
Spec Pos. LONG Oct / Dec @ 1.60, stop close @ 1.10; Exit 3.20.
 
  
Hedgers don't let profitable opportunities pass bye. Be prepared to sell new contract highs on up to 80% of your Q3 2010 to -Q2 2011 production.World feed grain demand is very strong, continue to keep your feed needs covered.
 
 
Please give us a call, become part of an elite ag risk management team.
Best regards,
Paul Nelson
 
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