MORNING LIVESTOCK REPORT Monday November 17, 2008
LEAN HOGS
Cash hog prices on Friday were steady to mostly higher. The talk for early this week is fully steady to firm. It appears there's not as many hogs booked for this week as earlier reported. The pork packers continue to operate at profitable levels but the weekly kill was down 3% from last year. The kill was dropped to below last year in three out of the last four weeks indicating that we've likely seen a peak our hog numbers. The pork was lower on Friday, quoted down .55 at 56.41. I believe the pork is in a bit better shape than reported the past two sessions. The hog market is fragile as the economic environment continues to fuel the concern that export business will remain slow. I'm working my hedge program as outlined to my customers last week. We'll likely have to lower some of our target prices a bit this week. The normal seasonal tendencies suggest you might see some additional strength over the next two to three weeks in the lean hog futures market. While some strength is possible, a sharp rally appears very unlikely. The outside markets appear mostly neutral today, possibly slightly friendly. Crude oil prices have rallied off their overnight lows early today and the dollar is trading lower. The stock market, we'll see? Friday's lower close (in hogs) was on light volume and lower open interest. I'm looking for a two-sided trade today, perhaps opening steady to slightly lower followed by a turn higher.
LIVE CATTLE
Live cattle futures closed lower across the board on Friday on light to moderate volume. Unlike the hogs, the lower trade in live cattle occurred on rising open interest. Total OI was up 2,915 on the lower close. Dec open interest was down by 1,338 but open interest was up in every other contract traded. That appears negative indicating aggressive selling coming into the cattle as traders worry/fret over recession and the resulting negative impact on beef demand. The cash steer market traded at 93 cents on Friday, down 1.00 from the previous week. The beef was down .35 at 157.02. The beef, however, was sharply higher for the week. The weekly slaughter pace was down 5% from last year. The trade might be anticipating that the seasonal beef demand may have run its course. I'm not so sure. Supplies of fed cattle should remain tight for at least a couple more weeks. The outside markets, I believe, might provide some support to the board this week. The dollar is lower, crude has recovered off the overnight lows and stocks are near steady. Recommend to use price recoveries off last week's lows to add to bearish trading strategies. My opening call is steady to slightly lower.
If you're a pork producer and you would like to see a copy of my special hedge report, give me a call or send an email at 1.877.377.7905 or dennis.smith@archerfinancials.com .
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.
