MORNING LIVESTOCK REPORT Thursday July 2, 2009
LEAN HOGS
The pattern in the cash hog market this week has been consistent. Pork packers put out a lower bid in the early morning and the late cash shows a trend much closer to steady money. I'm expecting hog numbers to tighten during July. Average hog weights dropped hard due to the heat wave experienced last week. If weights continued to edge lower that would also be supportive to the cash hog prices. Futures closed higher yesterday with a large buyer driving the Dec hog contract to a sharply higher settlement. It's my opinion that hog futures are likely forging a major low. I'm holding some bull spreads. The weekly kill looks to be below last year for the second consecutive week. I'm expecting the same next week. I'm still waiting for something positive to develop in the product. Certainly the product is offering a stimulus; pork prices are trading at six year lows. Look for the July hog contract to move over the Aug into expiration. The current CME lean hog index is quoted at 5865 with July hogs closing yesterday at 5925. It appeared that someone sold the July hogs when the employment report came out weaker than expected at 7:30 today. Good luck with that strategy.
LIVE CATTLE
Live cattle futures cranked out another higher close on Wednesday with the board chewing through resistance levels. The market looks poised to set back in back and fill fashion today. I'm long term bullish toward cattle prices and my spec traders are positioned from the long side in the Oct live cattle. My hedge clients utilized the sharp rally on Monday to establish put spreads for hedge protection on summer production. We've locked in an 83 cent price floor. Cattle slaughter remains aggressive with packers turning a profit on every beef carcass. We'll get weight data today from the USDA and I'm expecting average weights to decline in response to last week's heat wave in the Kansas and Nebraska regions. Most of the trade is expecting a fully steady to one cent higher cash steer market this week. Packers have paid 82 cents for inventory throughout the month of June. Aug feeders rallied through their November highs yesterday. Open interest was higher in fats from yesterday's trade. Look for a lower early trade with a good chance the market will recover prior to the closing bell.
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