MORNING LIVESTOCK REPORT Tuesday December 13, 2011
LEAN HOGS
Lean hog futures have been lower for 6 out of the last 8 sessions. The board has given up the premium to cash during the selloff. However, it's interesting to note that cash hog bids have held impressively well during the futures break. The pork carcass value has held up despite the seasonal tendency that suggests otherwise. Typically when Christmas demand is completed the hams take a substantial drop, dragging the pork carcass lower in the process. Hams continue to hold well. Robust exports business in tandem with an improving U.S. economy is no doubt responsible for the strong product. Economists continue to revised U.S. fourth quarter growth estimates upward with some projections now as high as 4% annualized growth. Oct pork exports soared by 42% compared to Oct of 2010. The USDA will issue their quarterly hog & pig report on Friday, December 23rd. Sow slaughter data supports the idea of no expansion in the hog industry. I'm buying the June hog contract today for a new long speculative position. I also favor bear spreads in the hogs with the Feb contract the short leg of the spread.
LIVE CATTLE
The "risk off" approach to commodity trading continued to force cattle futures lower yesterday. After opening 45 to 50 lower, futures plunged into new recent lows before staging a dramatic recovery and finishing the session slightly higher. Open interest continues to come down in the live cattle market. Live cattle futures were immune to the effects of the outside markets for the longest time but that's all changed of recent. Cattle futures have broke nearly 800 points since Dec 1, moving from premium to cash to discount to the cash market. Much of the talk during the hard break has been focused on the idea that beef demand is "no good". I'd caution against believing this. In fact, it's my opinion that overall beef demand has never been better. Beef exports are slated to set a record this year. It's my opinion the market put in a very important and possibly long term seasonal low yesterday. I'm trading accordingly with my spec customers.
If you would like a free 30-day trial to my evening livestock wire I invite you to give me a call or send me an email to Dennis.smith@archerfinancials.com or 1.877.377.7905.
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