by Mike Bauer, Senior Livestock Analyst February 13, 2014
I was surprised at the number of clients I have spoken to this week who were not aware of the labor dispute going on at the West coast shipping ports. For those of you who are unclear I will try to bring you up to speed. This is not something that just developed, this has been going on for 9 months and has really began to get ugly in recent weeks. The international Longshore and Warehouse Union (ILWU) have been working without a contract since July, and management officials claim cargo handlers have been slowing down operations in recent weeks to pressure the shipping companies and the big retailers who depend on the ships. Lawmakers from both political parties are urging the White House to act to resolve the impasse at West Coast ports. But the president cannot act unless there is a strike or lockout – something that has not yet occurred. The unresolved labor talks have added to the congestion at the ports, resulting in ships stranded at sea a day waiting to unload, hours long truck lines waiting for cargo and weeks long shipment delays. Terminal operators and shipping lines stopped the unloading of ships yesterday (Lincoln’s birthday) and will continue to do so today through Monday to avoid paying holiday pay and overtime pay to workers they claim are on a paid strike. Meanwhile, congestion continues to plague ports and impact the entire supply chain, from truck drivers waiting for hours to pick up containers to more than a dozen ships parked at sea waiting for berths at the Los Angeles and Long Beach ports. It has forced retailers to divert goods to other ports or ship them by air.
The labor dispute means Asian importers are beginning to look elsewhere for pork and beefsupplies, according to Norman Bessac, vice president of international sales for pork at Cargill. Testifying at a Senate hearing, Bessac admitted that "Our Asian customers cannot count on a dependable supply [of US meat Instead, he said, "They have started to cancel]." and are looking to suppliers in Chile, Australia and the European Union to meet their needs." Cargill ships more than 1,000 containers a month through the West Coast, depending on the season. Bessac said more than 1,000 containers a month through the West Coast, depending on the season. Bessac said the company has experienced delays to an array of other commodity exports including cotton, canola meal, soybean meal, whole grains, syrups and sweeteners, and distillers’ dried grains.
Live Cattle Live Cattle gapped higher on Monday and flirted with filling that gap, unsuccessfully the following two sessions. Thursday we filled the gap and today we bounced back and are trying to test the 154.55 highs made earlier in the week. At the time of this article we have tested but have not been able to sustain the 154.10 level which is the 38% retracement of the January sell-off. The market has gotten support from stabilizing boxed beef prices which have slammed on the brakes so to speak after a recent $21.00 slide in just two weeks. Boxed Beef (as of 9:30 am) has Choice at 238.09 down 101 and Select at 234.37 down .82. Both are just pennies away from the five day average. Cash sales also have been firming as of late with last week sales a buck higher than the previous week. Some light trade in Nebraska was seen at 162.50 and Colorado had moderate sales at 162.00. Asking prices remain firm at $164-165. I see cash sales up 2/3 dollars from last week.
Feeder Cattle Feeder Cattle also gapped up on Monday, made their high, for the week on Tuesday filled the gap on Wednesday then went on to make their lows for the week (196.92) the following session before bouncing back to test the weekly high of 205.00 (currently 204.80). Feeders received some support from the strength seen in the deferred months for the Lives latter in the week. Still when all is said and done we should be right around here we started on Monday. The latest CME feeder cattle index posted was up $1.09 cents at $210.92.
Lean Hogs After struggling earlier in the week, hogs have had a pop the last couple of sessions. This market has been hoping that the new lows that have been the norm the last couple of weeks would attract new buying interests but that hasn’t been the case. The shift from beef to pork bottom pickers have been waiting for is not materializing, West Coast port issues, rising production and failing cash prices continue to pressure the market. Hog futures continued their triple digit gains saw yesterday with follow through buying and spill over support from the Cattle Complex. Week to date slaughter is 1.7 million head, up 19K over last week and a hefty 152K over last year.
The pork carcass cutout price averaged $72.09, down 72 cents and featuring a sharp loss in the bellies; which have dropped nearly 12% from the report last Thursday. CME cash index for Feb. 10 was $64.82, down another 96 cents.
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For those interested in grain's, Tim Hannagan, Senior Grain Analyst at Walsh Trading holds a Weekly Grain Webinar. It is free for anyone who wants to sign up and if you cannot attend live a recording will be sent to your email upon signup. Tim will hold his next webinar on Friday, February 20th at 2:00 PM CST. Register Now.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS
Mike Bauer started his career at the CME in 1987. Working as a runner in the summers while attending college. He then landed a position with Refco before moving on to RJ Obrien, where he became the manager of their NY Order Desk. Mike has traded all major markets, but focuses primarily in the Agricultural Markets. He feels a good blend between fundamentals and technical’s make for good trading.