MORNING LIVESTOCK REPORT Tuesday March 16, 2010
LEAN HOGS
Hog futures closed lower on Monday and are expected to work lower in the early trading action today. I'm watching the market to see if April futures close below last Thursday's lows (7150). If this level gives way I'm expecting additional downside follow through. Cash hogs are called flat to lower for today on the heels of yesterday's sluggish to lower cash performance. The cutout was quoted up .22 at 74.05 but very lightly tested. A weak tone in the hams appears to be the key. I'm expecting additional weakness in the pork carcass this week. Pork packer processing margins remain profitable but they've narrowed. Logansport is on-line but the kill yesterday was just 418,000 compared to a 429,000 kill two weeks ago. Look for selling pressure during the course of the session today.
LIVE CATTLE
Live cattle futures closed higher across the board on Monday on upside follow through from Friday's strong performance. Friday's action took away all signs of a top. The only difference I notice about yesterday's performance was the fact that feeders closed mixed despite lower corn prices and despite what appeared to be a good auction at OK City, and, of course, despite the higher close in live cattle. Open interest in fat cattle was up again, increasing by 2370 and record large at 341,342. Yesterday's volume was good at 47,500 but down from the recent pace. The wholesale beef was higher yesterday which is keeping packer margins intact and likely keeping the board intact. The choice cutout was up 1.19 at 150.83. The beef cutout, since January, has far exceeded my expectations as a fundamental analyst. The downturn in beef production due to light average cattle weights has been a major contributor to the bull market. Looking ahead, mud will continue to be a problem in the north but the S. Plains feedlot situation is expected to "clean up" dramatically. My hedgers are holding large numbers of April puts and put spreads. I have very few traders outright short any of the cattle contracts. I have spec traders long the April 93 puts (purchased last Thursday near 90 points) and we'll see what happens. On the weekly chart the next resistance comes in at 9620.
If you would like a free trial to my evening livestock wire give me a call or send me an email to dennis.smith@archerfinancials.com or 1.877.690.7303.
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