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Pork Cut-Out Closed at Its Second Highest Value Ever Yesterday


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MORNING LIVESTOCK REPORT                 Wednesday April 13, 2011

LEAN HOGS

Cash hog prices were mostly higher yesterday with a similar outlook for today and likely the remainder of the week; steady to firm cash bids. Hog slaughter is expected to begin tapering off on a seasonal basis into the late May/early June timeframe. At the same time demand for U.S. pork remains good, if not excellent. The closing pork report yesterday showed the cutout up 1.44 at 96.03. This represents the second highest closing pork carcass value on record. The record high was set, I believe, last September. I remain bullish toward lean hog futures and still holding length in the most active June. Yesterday, we stepped in and bought the Dec hogs as well. Technically, I need to see a close in the June substantially above 10110, which would represent a close back above the 40-day moving average. Eventually, I'm expecting a penetration of the 10435 contract highs.

LIVE CATTLE

Live cattle futures traded near unchanged for much of the overnight electronic trade but buyers have surfaced early this morning, driving prices higher especially in the expiring April contract. If the cash market trades down 3 cents this week, toward $1.20, April futures are still undervalued. They settled yesterday at 11767. The selling pressure from the Goldman Sachs selling recommendation appears to have faded. Goldman clients were liquidating positions in a fund yesterday which included crude oil, copper, cotton and soybeans. These positions were established in December and the upside target on the basket was reached this week, eight months ahead of their projection. They decided to take the quick profit. Goldman analyses were quoted today in the WSJ stating they remain fundamentally bullish on many commodities. The trade yesterday, seemed to arrive at the conclusion they were bearish. Beef export business remains robust. Longer term, cattle placements into the feed yards is expected to drop off. We've been buying the Dec and Feb live cattle contracts to re-establish long positions. Today, I'll be looking at covering short calls for my hedge clients and looking at bullish option strategies in the feeders for my long hedgers that are concerned about another leg up in feeder cattle prices.

If you're not satisfied with your current brokerage relationship, give me a call at 877.377.7905 or send me an email to dennis.smith@archerfinancials.com.

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About the author


Dennis Smith has been a full service commodity broker specializing in grain and livestock trading for over 25 years. Dennis has a wide range of customers, many of whom are grain and livestock producers. Dennis develops and helps execute hedging and speculative strategies in his Daily Livestock Wire which is prepared each afternoon exclusively for his customers.

Dennis grew up in Central Illinois before launching his brokerage career.

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