Lean Hogs higher; up 4.00 from low/ Cattle holding gains

Published on: 15:04PM Nov 11, 2010

 

CME Feeder Cattle
CME Lean Hogs
Dec
99.05
-0.35
Nov
112.65
-0.15
Dec
69.12
+0.87
Feb
102.87
-0.15
Jan
115.07
+0.12
Feb
75.45
+0.65
Apr
106.82
0.00
Mch
115.52
+0.02
Apr
79.85
-0.02
 
Index
111.34
+0.07
Index
62.58
+0.45
 
 
 
To our Veteran's, THANK YOU!
 
 
Live Cattle:
 
NE trades 155.00-157.00; IA 155.00-57.000  Est 6500 hd
 
Veterans Day holiday Thurs. most Federal offices are closed
 
Midday beef Ch 157.05 (-0.30); Sel 148.96 (-0.18)
Drop post NEW high
 
FAS Export data Friday Morning
 
 
Live Cattle:Cattle settle mixed in light trade. USDA is closed in honor of Veteran's Day holiday leaving the markets without its normal fix of daily data. As we mentioned yesterday, basis the northern plains cast trade, the Dec board is a bit rich, which today's action corrected. Packer inventories are tight, Trade expectations for this week remain steady firm as well as setting the tone for next week's pre thanksgiving slaughter. Sept export data was released Wed, indicating yr over yr business was up 15.2% and dn 8.7% from Aug. Russia was an active buyer of Beef, Pork and Chicken. pacific rim business was strong as was our newest customer ROW (rest of world). ROW business posted yr over yr and month over month increase. Cheap US dollar continues to drive export business to our shores. YTD exports have averaged 9.4% of our weekly sales vs. 7.7% last yr. Wkly Box beef volume has been good; cutout values are drifting lower with the active slaughter, however Drop credit posted new high today, adding its support to packer profitability.   
 
Looking Ahead:Cash expectations have improved; Sioux Falls, SD traded 95.00-97.00 Wed, which is steady firm money. Historical basis puts Dec futures a bit rich, however with corn busting lower and overall positive export data today, better prices can be expected. Packer margins remain good, packer inventory is tight, plant maintenance and holiday hours should slow down chain speed this wk. Next week's slaughter will be against Thanksgiving week, tight inventories should keep cash expectations firm for the week.  Fund liquidation and the lack of new purchases have hurt differed fats; this trend could likely continue to yr end pressing board feeding margins. Private guesses for next wk COF are beginning to surface; we believe, on feed numbers will remain above ya for possibly the last time; Placements will be near 100%, leaving Marketings the swing number.   
 
Hedge Recs:  Lift Dec hedges on a scale down from 97.20 to 96.00.
 
 
USDA Boxed Beef Cutout Values
Choice
Select
Loads
157.08
-0.27
148.30
-0.84
323
Choice/Select spread @ 8.78
Drop Cr.
11.81 (+0.03)
Slaughter
Last wk
Yr Ago
WTD
Yr Ago
126,000*
121,000*
108,000*
388,000*
357,000*
 
 
* Prior days Information
 
FEEDER CATTLE:
 
Funds push futures higher
Tx/So OK 2nd precip event forecasted Mon/Tues  
 
Tighter holiday market have started; Nov feeders expire next Thurs (11/18). Holidays will disrupt weekly auctions, needed precip is forecasted for the southern plains, and cheaper corn has lifted the monkey off current feeding cost. Board margins are showing negative margins for winter and early spring feeders which may limit Jan feeders from pushing through 116.00, but breaks should be bought until corn finds a demand clearance price. Mch forward should continue to adjust for tight spring run and better commercial demand.
 
* Prior days Information
 
 
USDA Pork Carcass Cutout Values
Load vol.
Cutout
76.17
-0.56
28.00
Slaughter
Wk Ago
Yr Ago
WTD
Yr ago
428,000*
428,000*
402,000*
1281,000*
1264,000*
National Live Trade Wtd. Px
Net*
Vol.
National
63.43
+1.96
10,320
IA/Minn
63.42
+1.82
5603
W. Cornbelt
63.35
+1.82
6805
E. Cornbelt
63.76
+2.73
3194
 
* net is based upon HG 200 report "National Direct Prior Day"
 
Lean Hogs
 
Loins dn 2.15 @ 83.59; Cutout -0.56 @ 76.17
 
USDA offices closed in honor of Veteran's Day holiday
 
Index recovers, can cutout hold?
 
 
Lean Hogs-settled mostly higher on further position liquidation. Open interest fell 1511 yesterday, we are expecting this trend to continue. Sat slaughter is expected to be heavy. Packer needs remain covered, BUT for the moment the we no longer have the "one extra" hog which broke cash prices for the past 6 weeks. Chain speed is expected to remain aggressive due to strong packer margins. This will put product values at the forefront. Can today's market support higher pork product? Sept Export Data was supportive, month over month sales increased 4% will yr over yr were dn 9.0%. The good news New sales to China and Russia were noted. Keep in mind this was shipped while domestic prices were record high. Post Holiday wkly slaughter est. @ 2260-2310. The real test will be product values from here forward. Seasonal trends are lower, can they hold allowing chain speeds to remain aggressive? CME index for next week is est. 63.00-66.00 range.  
 
Looking Ahead: Futures are still holding a wide premium to the index, which will need to adjust. Fund liquidations may become an ongoing concern as yr end approaches. USDA increased pork production est. for the 4th and 1st quarters. packer margins and steady product values will remain key points to watch. Granted packer margins have been very strong, however they have been since May; We believe packers will try to maintain current margins putting a great deal of pressure upon product values to hold and work higher to support 68.00 Dec and 74.50 Feb. Weights have improved, with Sat slaughter scheduled for 11/20; buyers actually have space at the kill motel. This is very positive for holding our lows but without higher product prices to support better cash, current wide basis may make it tough to hold flat prices at current levels. 
 
Hedger's- Hope is here for better 1st quarter prices, however sharply higher corn prices could pressure Feb below 70.00, If sub 70.00 prices are concern Do Not let this opportunity pass. Please call us for specific reconditions.
 
Please give us a call, 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, 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.