Weak Dollar Improves Beef Exports/ Cash Hogs drift lower

Published on: 17:31PM Oct 18, 2010

 

CME Live Cattle
CME Feeder Cattle
CME Lean Hogs
Oct
99.07
+0.92
Oct
108.80
+0.05
Dec
68.02
-0.87
Dec
100.72
+0.60
Nov
109.55
+0.17
Feb
72.87
-0.45
Feb
102.87
+0.30
Jan
109.65
+0.05
Apr
77.37
-0.37
 
Index
107.48
-0.77
Index
72.74
-1.32
 
 
Live Cattle:
 
 
Midday box beef 155.90 (+1.22) 148.22 (+1.20) 096 lds
Show list dn 1800 hd;
 
No deliveries, partly through 10/4/2010
 
Solid wkly exports; strong out-front sales as reported from USDA wkly Comp Box Beef
 
 
Live Cattle: Cattle closed sharply higher as Oct led the way, followed by managed money flow into Dec and Feb. Friday's OI net increased 4860.  Midday beef quotes pushed higher on light volume ahead of month end retail bookings. Wkly comp box beef reported very strong exports for the second week in a row. Out-front sales were strong as well, which would suggest chain speed will need to hold 640-650 (1000 hd)per wk. Late summer/fall placements against 4th quarter marketing's should accommodate the expected sales.    
 
Looking Ahead: This week's trade  is expecting steady firm cash trade; cme board looks to be holding a 3.00 premium to the northern plains market which may bring another round of deliveries. Head count numbers are down a bit in KS, Co, and TX cash. Northern plains show modest increase on both cash and committed; Overall this week's numbers are down 1800 head. Out-front sales should keep cash bids firm as chain speed should put wkly slaughter near 640-650. Friday brings COF report, early indications have placements and marketing's up leaving ON feed numbers holding yr ago levels. Managed money flow (new buying) should lend support into midweek, primarily against Dec, and Feb as technical buying  takes over for a few days. How will things play out for the last half? Weekly slaughter est. for the next two wks @ 650 and forward sales commitments would keep packers short bought. Chain speed will be import to watch, one of our longer term concerns is steady feed yard supplies (counter seasonal) against softer seasonal demand in Nov and Dec. Strong slaughter continues to keep producers marketing's current. Look for Dec to test 101.50 and Feb as futures market consolidates for the next 2-3 weeks.
 
Hedge Recs:  Grower should be looking at pricing in downside protection for Dec to Feb production. Can box beef sustain 101.00 -104.00 fed cattle market? First quarter hedge idea; we can show you how to protect 94.00 Feb for little or no premium...Give us a call.
 

 

USDA Boxed Beef Cutout Values
Choice
Select
Loads
155.92
+1.24
148.97
+1.95
195
Choice/Select spread @ 6.95
Drop Cr.
11.19 (+0.01)
Slaughter
Last wk
Yr Ago
WTD
Yr Ago
128,000
130,000
125,000
-
-
 
 
 
 
 

 

 
 
 
 
 
 
* Prior days Information
FEEDER CATTLE:
Feeders settled moderately higher on steady to 2.00 higher market in OK City. Lower corn and near contract highs in Feb, and April fed cattle help to firm bids. dry weather remains a factor, forecasters have added some precip for later this week and the 11-16 forecast is calling for additional coverage for the plains. Peak numbers look to behind us which may lend a supportive hand to feeders if forecasted rains come.  Nov (110.50-107.50) and Jan will tend to be more range bound until the market has better idea of winter weather patterns and what this means for available 4th quarter pen space. Look for futures to continue to adjust for tight spring run and better commercial demand for Mch forward. Next week's actions should be met with lower bids as commercial buyers remain cautious over COG.  
* Prior days Information

 

USDA Pork Carcass Cutout Values
Load vol.
Cutout
80.61
-0.46
71.50
Slaughter
Wk Ago
Yr Ago
WTD
Yr ago
422,000
415,000
423,000
-
-
National Live Trade Wtd. Px
Net
Vol.
National
63.43
-0.72
13591
IA/Minn
62.99
-1.07
6360
W. Cornbelt
62.95
-1.05
7315
E. Cornbelt
64.02
-0.46
6147

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lean Hogs: 
 
Oct final settlement 72.74 -0.26
CME lindex expected to drift lower
 
Pork Product expected to drift lower as chain speeds ramp up.
 

 

 

 

 
Lean Hogs- settled lower off further weakness in the cash markets, product prices posted lower values however eastern Cornbelt market maybe showing signs the mid 60's will hold this week's cash. Without a dramatic change in production it will be hard to move cash higher for the moment.  The trade continues to believe  slaughter needs are covered for the remainder of Oct. Technical selling continues to pressure the market off managed money liquidation.
Looking Ahead: Chain speed remains strong slaughter needs are believed to covered, so what's next? Exports, better retail demand, lighter hogs this will take time, however with beef prices back near their highs, cheap US dollar; improving demand base has long term benefits.  For now look for cash prices to remain weak drifting into the 60's basis Dec lean. With appeal hog supplies expected and slaughter capacity constraints; look for nearby futures to remain defensive as additional managed money heads for the sidelines. Product prices will remain defensive off peak slaughter numbers leading into Thanksgiving. Per head weights remain high. Small corrections can be expected, however, until we see a dip in weights or packers stretching to cover their needs (which now looks to be sometime after 10/31), rallies should be sold. .      
 
  
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Best regards,
Paul Nelson
 
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