MORNING LIVESTOCK REPORT Wednesday October 7, 2009
LEAN HOGS
Lean hog futures rallied on Tuesday with the market action preserving the uptrend which appeared in jeopardy. Prices were flirting with their 40-day moving averages for the first time since early in Sep. Strong cash bids for live hogs in the interior of the Midwest contributed to the higher board yesterday. Pork packers are currently processing hogs at profitable levels and they want to keep the chain speed in high gear. Evidently a couple of packers out west decided to bid aggressively for animals to assure full plants for the remainder of this week. Yesterday's kill was pegged at 434,000 which is bumping up against capacity. Daily capacity is likely somewhere near 440,000 head per day. The largest daily kills we've seen this fall occurred two days last week at 435,000. Other pork fundamental data does not appear bullish. For example, average weights for last week were reported this morning at 268.4 lbs, even with last week and up 2.5 lbs from last year. The weekly belly out-of-town report showed an out movement of 939,000 which was below the year ago out movement of 1.317 million lbs. Belly stocks in the out-of-town warehouses are double stocks of last year...nothing bullish here. Finally, the pork cutout value was down .98 yesterday severely cramping packer margins as we understand them. Major resistance in the Dec hogs should be evident in the 5000 to 5050 range. If something much bigger than meets the eye is going on here this resistance will be penetrated. Otherwise, I'd expect rallies to fail.
LIVE CATTLE
Live cattle futures closed into fresh lows yesterday in the first two contracts in a miserable trade. A few cattle traded yesterday in NE at lower money but thus far a widespread cash steer trade has not developed. Deliveries continue to dominate the trade talk with all 110 posted on FND retendered with an additional 39 loads tendered. However, it was interesting to note that all 110 retendered were demanded at the $1.00 discount. Evidently, then, there is some demand for cattle. For the first time yesterday, in a long time I detected some signs of life in the wholesale beef trade. The choice cutout was up .65 on good box movement reported at 203 boxes and 86 trim. If this continues today it likely will spur a short covering rally in futures. My opening call is flat to up 25.
If you'd like a free two week trial to my evening livestock wire please send me an email to dennis.smith@archerfinancials.com .
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