The Livestock Report
by Robert Short
Livestock Statistics Week Ending 11-14-09
11/18/2009
HOGS: (week ending 11/14/09)
Weekly Statistics
- Pork Product (wholesale)
- Loins 82
- 2.4% lower than last week (84)
- 13% lower than last year (94)
- Loins 82
- Butts 67
7% below last week (72)
ii. 12% below last year (76)
c. Hams 67
i. 4.6% higher than last week (64)
ii. 34% higher than last year (50)
d. Bellies 74
i. 2.7% higher than last week (72)
ii. 9% higher than last year (68)
II. Cash Hogs
a. Peoria 35
i. 3% higher than last week (34)
ii. 7.6% higher than last year (32.5)
b. Zumbrota (St. Paul) 36
i. Unchanged from last week (36)
ii. 3% lower than last year (37)
III. Hog Weight 271.3lbs
a. Last week 270.41lbs
b. Last year 267.0lbs
IV. Pork Production (millions of pounds)
a. 464.6
i. .5% below last week (466.0)
ii. 1.2% below last year (470.1)
b. 19887 (year to date)
i. 1.8% lower than last year (20237)
V. Lean Hog Index
a. 5547
i. .2% higher than last week (5532)
ii. 6.1% higher than last year (5224)
December hog futures closed the week at 5500 – a loss of 70 points. February futures lost 100 points. April hogs down 65 points.
Local traders continue to sell hog futures as funds continue to get out of shorts. Last week saw funds, futures only, getting a net long of 3404 contracts. This now puts them long a net of 6751 contracts. Adding options they are now a net long 18496 contracts.
The past two week local selling has gotten a break of approximately 200 points. This selling is always attempted in front of Thanksgiving. Turkeys and hams take up the bulk of cooler space in November. Most retail buying of hams and turkeys is over by the first week of November. As stated in last week’s report, locals were expecting a six cent to eight cent break in hams and a correction in wholesale bellie price of four cents to six cents. Unfortunately for sellers, the ham market advanced three cents and bellie cash up two cents.
We have discussed the trading psychology of going into a holiday shortened kill week. Quite simply put – we eat seven days a week, but only produce four days worth of product. This gives rise to the thought that product could rally. The first week of December is usually a beef feature week. The second week is devoted to pork. This interest to feature pork the second week of December, almost always, gives a rally in hams, loins and bellie quotes. Retailers turn to red meat during this time period as they assume consumers are tired of poultry for Thanksgiving.
Locals are quite short as of Friday, November 13th. They have not got their ham or belly break. These last two weeks find the funds getting bullish. The last three years show a market propensity for futures to rally, on the above psychology, no later than Thursday, November 19th.
TECHNICAL:
Market making a bull flag formation. A close above 5520 in February hogs would be very friendly. A close above 5700 would be bullish.
RECOMMENDATION:
We are trying to buy February hogs between 5800 and 6000. Aggressive traders should buy on a close above 5520. A sell-stop will be posted in next week’s missive. We still look for the lean-hog-index to reach 6350-6550 by the middle of February.
CATTLE: (week ending 11/14/09)
Weekly Statistics:
I. Cash Cattle
a. Texas/Oklahoma $85.00 (U.S. dollars per 100 pounds)
i. Last week $88.00
ii. Last year $93.00
b. Nebraska $83.00
i. Last week $86.00
ii. Last year $93.00
II. Boxed Beef (value reflects US dollars per 100 pounds)
a. Choice $139.42
i. Last week $140.78
ii. Last year $157.02
III. Hide and Offal (five day average)
a. $8.03
i. $8.12 last week
ii. $10.72 last year
IV. Retail Beef Price (15-cut average)
a. $3.94
i. $3.63 last week
ii. $3.79 last year
V. Beef Production (millions of pounds)
a. 492.9
i. $499.50 last week
ii. $483.20 last year
December cattle futures were down 168 points for the week. February futures were down 112 points. The April contract was down 130 points for the week.
The CFTC “Commitments of Traders” report shows speculative funds on a buying binge. In futures-only positions they, again, have added a net long of 4439 contracts. They are now a net long 27,365 contracts. Adding options they had a net long, for the week, of 5352 contracts. Total net long is now 46,735 contracts. Index funds added a net long of 2775. They now have a total net long position of 121,133 contracts. Non-reportable (small traders) are a net short of 31,870 contracts. It is seldom you see small specs beat funds, but “beat them they have” as we are on a fourteen day 400 point sell-off. Total cattle open-interest is rather high at 266,000 contracts, and continues to build as funds buy and small specs sell.
Boxed-beef “choice” pricing was up 1% for the week as grocers are booking beef for the first week of December. Meat retailers feature beef the first ten days of December as they feel consumers are tired of ham and poultry over the Thanksgiving holidays. Grocers switch to pork during the second week of December. Wholesale boxed-beef currently is running 11% under last year, but grocers have pushed retail beef to a 4% premium over last year.
We continue to be negative February futures. 400,000 more cattle were placed into feedlots during July-October time frame than last year. As these cattle come to market weight, we should see January-February cash cattle trade between 8000-8200. February futures are still too high on this price projection.
The only friendly fundamental for cattle futures is that dressed weights are falling. This would indicate we are a bit more current than bears would like to see.
One last negative for December red meat demand (mostly beef), Christmas holiday parties are projected at 21 year lows.
TECHNICAL:
We are on a 15 day sell-off in February cattle futures. A close under 8450 projects a low of 8200-8250.
RECOMMENDATION:
1. We were stopped-out of a long December cattle with a loss. I feel locals started this selling 1-2 weeks sooner than needed.
2. We missed selling February futures by 25 points. We need a short-covering rally to sell. A near term rally to 8630-8700 should be sold.
(Editors note: Little known and worthless fact. Ukraine’s cattle population down 3.6% on year).
Robert Short
PFGBEST Research Team
rshort@pfgbest.com
Livestock Statistics Week Ending 11-07-09
11/11/2009
HOGS: (week ending 11/07/09)
Weekly Statistics
- Pork Product (wholesale)
- Loins 84
- 5.6% higher than last week (89)
- 15.1% lower than last year (99)
- Loins 84
- Butts 72
4.3% higher last week (69)
ii. Unchanged from last year (72)
c. Hams 64
i. 1.6% higher than last week (63)
ii. 133% higher than last year (44)
d. Bellies 72 (frozen)
i. 4% lower than last week (75)
ii. 5.9% higher than last year (68)
II. Cash Hogs
a. Peoria 34
i. 13.3% higher than last week (30)
ii. Unchanged from last year (34)
b. Zumbrota (St. Paul) 36
i. 12.5% higher last week (32)
ii. Unchanged from last year (36)
III. Hog Weight 270.4lbs
a. Last week 269.91lbs
b. Last year 267.2lbs
IV. Pork Production (millions of pounds)
a. 466.0
i. .45% larger than last week (463.9)
ii. .15% larger than last year (465.3)
b. 19409.9 (year to date)
i. 1.8% lower than last year (19766.9)
V. Lean Hog Index
a. 5532
i. 2.7% higher than last week (5384)
ii. .28% lower than last year (5547)
VI. Pork Price $2.07 (13 cut wholesale average)
a. $2.08 last week
b. $2.22 last year
December hog futures closed the week at 5570 – a loss of 100 points. February futures lost 75 points. April hogs down 60 points.
This past week gave us a small correction from the previous week. Floor traders are attempting to trade the short side, of hog futures, looking for the normal Thanksgiving correction on most pork items. Turkeys and hams take up the bulk of retail cooler space during the month of November. Most pork brokers, now that Thanksgiving business has been booked, are calling for a six cent to eight cent ham break. In addition, most brokers expect a four cent to six cent frozen bellie break over the next few weeks. Loins and butts have gone nowhere during the last few weeks and are expected to stay about steady.
The local selling has been met with quite large fund short covering. This past week gave us a, futures only, net long of 10542 contracts, and now shows, futures-only, large position holders a net long of 3347 contracts. Two months ago these funds had a net short position of over 22,000 contracts. When options are added to futures, we have a net change for the week of 12203 contracts added to the long side. This now gives a net long of 15547 contracts.
The month of December gives another rally in most pork product for Christmas. This pork buying usually lasts into the middle of December. In addition, to this pork buying, the under 60lb weight group from the September pig crop should give a supply of hogs down 4% to 5% during January and February.
Assuming H1N1 does not come to the forefront of consumer psychology, and experts continue at present levels, we should be a buyer of February hogs on breaks in November. The normal lean-hog-index advance is 15% to 20% from the pre-Thanksgiving lows. We would expect the index to reach between 6350 and 6550 by the middle of February.
RECOMMENDATION:
We should look to buy February futures between 5800 and 6000. A sell-stop of 5677 stop-close only would be appropriate.
If fund short covering continues to overwhelm local selling we will reassess our entry level.
CATTLE: (week ending 11/07/09)
Weekly Statistics:
I. Cash Cattle
a. Texas/Oklahoma $88.00 (U.S. dollars per 100 pounds)
i. Last week $88.00
ii. Last year $94.00
b. Nebraska $86.00
i. Last week $86.00
ii. Last year $93.00
II. Boxed Beef (value reflects US dollars per 100 pounds)
a. Choice $140.78
i. Last week $140.83
ii. Last year $50.25
b. Select $135.44
i. Last week $135.38
ii. Last year $142.50
III. Hide and Offal (five day average)
a. $8.61
i. $8.37 last week
ii. $9.60 last year
IV. Retail Beef Price (15-cut average)
a. $3.63
i. $3.82 last week
ii. $3.86 last year
V. Beef Production (millions of pounds)
a. 499.5
i. $518.90 last week
ii. $487.20 last year
iii. $22004.70 year-to-date
1. $22712.10 last year
December cattle futures were down 67 points for the week. February futures were down 58 points. The April contract was 35 points higher.
The CFTC Commitments of Trades report, again, shows trend following funds adding a net 6,648 contracts to the long side. This now gives them a total net long of 22926 contracts. Adding options shows them with a total net long of 41383 contracts. Four weeks ago funds ere a net long 12901 contracts. December cattle futures closed four weeks ago at 8495. We closed this past Friday (four weeks later) at 8500. Funds, therefore, bought close to 30,000 contracts and moved the market five points.
Wholesale “boxed-beef” price closed at $140.78 for the week. This “choice” price was $6.80 higher than four weeks ago, or an increase of five percent. Last year this same four week span gave us a price increase of 68 cents.
Floor traders continue to sell cattle futures into the Thanksgiving holiday period. They continue to feel “beef” will take a back-seat to pork and poultry into Thanksgiving. In addition, traders feel the operating margin index at minus $21.05 per head will not allow beef packers to pay higher money for cattle. Last year, for this same week, the margin was a plus $5.30.
As stated last week, feedlot cattle placements during the July-September period should give us an increase in supply of four percent to six percent from December through February. Assuming normal beef demand we should take cash cattle to $80.00-$82.00. Cash cattle closed last week between $85.50-$88.50.
Cattle futures are on a ten day break in spite of friendly fundamentals. Floor traders are beating the fund buying.
RECOMMENDATION:
1. Long December futures between 8500-8600. Sell stop at 8435 stop-close-only
2. We were trying to sell February cattle between 880-8900. We missed the bottom side of this range by 25 points. We will continue to look for a rally to sell. If funds should decide to sell-out their large net long positions, we would look to sell below the 8800-8900 level.
Robert Short
PFGBEST Research Team
rshort@pfgbest.com
Livestock Update- Week Ending 10-31-09
11/4/2009
HOGS: (week ending 10/31/09)
Weekly Statistics
- Pork Product (wholesale)
- Loins 89
- 3.5% higher than last week (86)
- 18.4% lower than last year (109)
- Butts 69
- Unchanged from last week (69)
- 9.2% lower than last year (76)
- Loins 89
- Hams 63
3.2% higher than last week (61)
ii. 8.6% higher than last year (58)
d. Bellie 75 (frozen)
i. Unchanged from last week (75)
ii. 4.2% higher than last year (72)
II. Cash Hogs
a. Peoria 30
i. Unchanged from last week (30)
ii. 15.5% lower than last year (35)
b. Zumbrota (St. Paul) 32
i. Unchanged from last week (32)
ii. 15.8% lower than last year (38)
III. Hog Weight 269.9lbs
a. Last week 269.1lbs
b. Last year 266.2lbs
IV. Pork Production (millions of pounds)
a. 463.9
i. 1.4% lower than last week (470.3)
ii. 3.5% lower than last year (480.7)
b. 18943 (year to date)
i. 1.9% lower than last year (19301.6)
V. Lean Hog Index
a. 5384
i. .8% higher than last week (5341)
ii. 8.6% lower than last year (5890)
VI. Pork Price $2.08 (13 cut wholesale average)
a. 4.2% lower than last week ($2.17)
b. 9.2% lower than last year ($2.29)
December hog futures closed the week at 5670 – a gain of 342 points. February futures were up 295 points. April hogs up 160 points.
Floor traders came into the past week looking for the normal seasonal decline in cash hogs and pork product. The normal lean-hog-index decline is 10% from October to December. This 1-% decline would put the index between 42 and 44. Unfortunately, psychology had a very bullish flavor fro the week based on the following:
a. The “dollar index” rally caused Russia and China (living hand-to-mouth) to fear a low might be in U.S. pork. They have started to cover ham needs.
b. Blue Ear disease was found in five provinces in China. This disease and the Olympics forced China to buy large amounts of pork in 2008.
c. African swine fever was found near St. Petersburg, Russia. Traders worry the spread of this disease would call for further pork purchases.
d. Canada announced their hog herd was down seven percent. The combined U.S. and Canadian hog herds are down three percent. Feeder pig receipts, from Canada, are running 20% under last year.
Added to the above friendly psychology is the need for corn and bean harvest. This needed harvest concern will leave farmers on tractors with no enough time to sort and deliver hogs. This would support cash hogs this coming week.
The weekly “Commitments of Traders” report shows further fund short-covering. “Futures-only” positions for last week has funds buying a net 3571 contracts. When options are added to “futures-only” position, we find funds a net long on 3344 contracts.
At this time of year, to hold this rally, the good news must keep coming. We, again, are putting in unsustainable premiums in hog futures. December hog futures closed +273 points to the lean-hog-index. Last year we closed -410 points. February closed +943 points against last years +401 points. These premiums will be impossible to hold unless pork product continued to rally. Pork brokers feel China will buy little U.S. pork. They believe Russian ham-buying is about over. Going into the “Thanksgiving” holiday most pork products are on the defensive.
We were taken out of our shorts on a close-only at 5540. It’s unfortunate we got caught in the friendly psychology flack.
RECOMMENDATION: None.
CATTLE: (week ending 10/31/09)
Weekly Statistics:
I. Cash Cattle
a. Texas/Oklahoma $88.00 (U.S. dollars per 100 pounds)
i. Last week $86.50
ii. Last year $93.00
b. Nebraska $86.o0
i. Last week $85.00
ii. Last year $92.50
II. Boxed Beef (value reflects US dollars per 100 pounds)
a. Choice $140.83
i. Last week $139.02
ii. Last year $142.21
b. Select $135.38
i. Last week $133.91
ii. Last year $136.32
III. Hide and Offal (five day average)
a. $8.37
i. $8.14 last week
ii. $10.00 last year
IV. Retail Beef Price
a. $3.82
i. $3.63 last week
ii. $3.92 last year
December cattle futures were down 170 points for the week. February futures were down 90 points, 82 points lower for the April contract. Cattle futures were down all five days.
Boxed beef demand was good for the week as we put $1.81 on the “choice.” Last year for this week, we put 69 cents on product. Ribs and tenderloins will continue to be featured, by retailers, into the holidays.
Cash cattle continue to rally. We put $1.00-$2.00 on cattle for this week. Last year we put $1.50 on cash cattle.
The CFTC Commitments of Traders report continues to show “index” funds adding 4659 contracts to their long position – now 115874 contracts. Trend following funds and large speculators added a net long of 10840 contracts for a net long of 16278 contracts. When options are added to futures-only positions, trend following/large specs have a net long of 33564 contracts. This was one of the largest weeks of the year for funds adding “longs.”
We talked last week of a “hole” in cattle marketings during September and October. The decline in feedlot marketings projected a price between $87.00-$89.00. The Texas/Oklahoma cattle cash traded $88.00 this week. Fed supplies are at their tightest point and will stay this way for the next few weeks. Larger last summer placements project a 3% to 4% increase in late December into February marketings. As stated in last week’s missive, the increase in marketings should give a price of $82.00.
Retailers continue to worry about cheap pork competition. Consumers see 10% unemployment, the uncertain economic outlook and remain cautious buyers.
Floor traders have decided to pressure the market this week. They appear to be one to two weeks early in their selling. With funds having a large long position, if the market starts down it could be a rather quick break as funds liquidate long positions.
RECOMMENDATION:
1. Buy December futures between 8500-8600. Use a sell-stop of 8435 stop-close only should be used
2. Sell February cattle futures between 8800-8900. A buy-stop for this trade would be 9050 stop-close only. Should we get filled on both positions, this would be the proper spread for this time of year.
Robert Short
PFGBEST Research Team
rshort@pfgbest.com
There is a substantial risk of loss in trading futures and options.
Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.