MORNING LIVESTOCK REPORT Monday October 19, 2009
LEAN HOGS
Cash hog prices are called fully steady on the heels of a firm tone Friday. Weekly hog slaughter came in at 2.295 million, down 3% from last year. This makes the second consecutive week that hog slaughter has come in below last year. Stability in the pork fundamentals has been better fundamental news than what I've anticipated (feared) in the hog market this month. Oct futures expired in good shape with Dec now the front month. This week the trade is waiting to see if index fund buying appears as advertized. It is widely known that Deutsche Bank is in the process of reallocating the weighting of their Ag Fund, lightening up in the energy sector and corn, soybeans and wheat while increasing their weighting in other ag commodities including KC wheat, cocoa, coffee cotton, live cattle and lean hogs. These reallocations are expected to be complete by Oct 31. Several reports seem to suggest all of this "movement" would occur the last two weeks of the month, starting today. Repeating, this has been widely anticipated by the trade. The pork cutout enjoyed price stability last week, gaining just over $3.55 for the week and packer processing margins improved last week as well. In December lean hog futures I have very few hedge positions on the book. We've established option window strategies in the Feb and April. I am trading Dec hogs from the short side for my spec traders with buy stops above the market. Today's opening call looks to be fully steady.
LIVE CATTLE
The cash steer market traded higher on Friday with packers paying fully 1.00 to 2.00 higher for slaughter inventory. Market tops were reported at 84 cents. While I was not in the office on Friday, it appears to me this information was widely known during the trading session, thus, not a surprise for this morning. The weekly kill came in at 629,000, slightly below the year ago slaughter pace. The beef cutout was up .50 on slow to moderate movement of 211 boxes and 82 trim. The cattle-on-feed confirmed the placements during Sep were above last year and that marketings of cattle during the month were below last year. The result is on-feed numbers above last year, which is not bullish. I'm expecting the board to remain in a down trend mostly because beef demand remains flat to lousy. I'm also expecting the board to eventually move discount to the cash steer market. My opening call is fully steady.
If you would like more information about this article, please contact Dennis at 1.877.377.7905 or email him at dennis.smith@archerfinancials.com.
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