The Livestock Report
by Robert Short
Livestock Statistics (week ending 03/06/10)
3/12/2010
HOGS: (week ending 03/06/10)
Weekly Statistics
- Pork Product (wholesale)
- Loins 111
- Last week 115
- Last year 92
- Loins 111
- Butts 85
Last week 84
ii. Last year 77
c. Hams 78
i. Last week 78
ii. Last year 45
d. Bellies (bacon) 92
i. Last week 90
ii. Last year 75
II. Cash Hogs
a. Peoria $48.00
i. Last week $47.00
ii. Last year $35.00
b. Zumbrota $48.00 (St. Paul)
i. Last week $48.00
ii. Last year $38.00
III. Hog Weight
a. 269.2 (pounds)
i. Last week 268.4
ii. Last year 267.5
IV. Lean Hog Index
a. 7238
i. Last week 6912
ii. Last year 5844
V. Pork Price (13 cut retail average)
a. $2.24
i. Last week $2.09
ii. Last year $2.25
VI. Packer Operating Margin
a. +$1.70
i. Last week +$2.12
ii. Last year -$19.64
VII. April Hog Premium/Discount to Lean Hog Index
a. +72
i. Last week +368
ii. Last year +406
April hog futures closed the week at 7310 – up 30 points. June futures closed 47 points higher at 8187. July lean hog futures closed 148 points higher for the week at 8195.
Open interest was up 12,363 contracts for the week– now at 195,728. Average daily volume of 34,000. This volume was 26% over the previous week and 79% over two weeks ago.
For the five-day period ending 03/03/10, speculative funds added a large 8452 contracts to their net longs now 29,368. Adding options we find speculative funds adding 4027 to their long positions – now at 43,018. Non-reportable position holders decreased their net short positions by 333 contracts. This groups now a net short 9623 positions.
“Managed money” accounts added 3141 contracts to their net long position of 31,045.
Commercial accounts added 10,714 to their net-short positions – now at 33,395.
“Battle lines” are being drawn in hog futures this week. After a four week hiatus “funds” are buying hog futures. This buying is much lighter than what we have seen in cattle over the last five weeks but it does appear funds may be starting a “buying” program. This potentially bullish scenario is offset by floor traders increasing their “short” positions over the last three weeks. The combination of large fund buying and floor selling gave us a 6.7% increase in open interest and a 26% increase in daily volume from the prior week and 79% over two weeks ago.
Floor traders are looking for the seasonal mid-lenten pork product break. They are, also, aware cash hogs gain in February was $5.00 per 100 pounds. This was the second largest gain in the last ten years. In addition, wholesale pork prices gained over $4.00 for the month of February on a ten year average of $2.13. With cash hogs and pork pricing advancing by these rather large amounts, floor traders believe we have temporarily priced pork product too high for consumer meat-case purchases. This belief is helped by the volume of weekly pork trade reported to the U.S.D.A. Last weeks reported volume of 288 loads was 18% under the prior week; 26% under two weeks ago and 27% under last year.
Another potentially negative for pork pricing is the ongoing U.S.-Russia talks on poultry. The second round of bilateral talks ended with no resolution. U.S. poultry is still being put into cold storage. It remains to be seen how long this can continue before poultry prices fall – becoming a price depressant on pork.
Hog weights have not been declining as in their seasonal tendency. This week saw hog weights increasing .8 pounds. This contra-seasonal increase has traders worried January light kills were weather related. As these hogs gain weight they will be coming to market in greater numbers – thereby depressing prices.
This coming week is going to be too tough to call. Funds show a remarkable ability to push their positions for much longer than fundamentals dictate. We are at this crossroads. March corrections should be bought as light cold storage stocks and Russia resuming buying of U.S. pork should take our summer “lean-hog-index” to 8000-8200 (now at 7238).
CATTLE: (week ending 03/06/10)
Weekly Statistics:
I. Cash Cattle
a. Texas/Oklahoma $91.00-$92.00 (U.S. dollars per 100 pounds)
i. Last week $91.00-$92.00
ii. Last year $82.00
b. Nebraska $144.00-$145.00 (carcass hot-weight)
i. Last week $144.00-$145.00
ii. Last year $130.00
II. Boxed Beef (value reflects US dollars per 100 pounds)
a. Choice $149.59
i. Last week $149.96
ii. Last year $135.06
b. Select $148.11
i. Last week $149.56
ii. Last year $134.57
III. Hide and Offal
a. $9.88
i. Last week $9.80
ii. Last year $6.29
IV. Retail Beef Price (15-cut average)
a. $3.56
i. Last week $3.79
ii. Last year $3.62
V. Packer Operating Margin
a. +$27.85
i. Last week +$14.35
ii. Last year -$31.55
VI. April Cattle Futures Premium/Discount to Panhandle Cash Cattle (Friday Settlement)
a. +$0.95
i. Last week -$0.08
ii. Last year +$1.52
April cattle futures closed the week at 9295 – up 103 points. June futures closed up 117 points at 9157. August closed 9020 – a gain of 138.
Open interest increased 3.6% to a record 325,681 contracts. Volume averaged 43,000 daily up from a daily average of 36,000 the previous week.
Speculative funds increased their net-longs by 6223 contracts – now long 86,320 positions. “Futures/options” position holders increased their net longs by 8223 contracts. This group is now long a record 110,610 positions. “Managed money” accounts increased their net longs to 99,872 contracts – an increase of 8082 for the week. “Index” (long only) funds increased their long exposure by 2100 to 133,880 positions. Commercial accounts added to their “short” positions by 8884 – now net short 63,791. Non-reportable are a net short 46,820 – an increased of 1660 positions for the week. Funds continue to hold record “long” positions in all categories.
Cattle futures experienced a mild rally this week of 100 to 140 points. The bulk of this was caused by cattle-hog spreads. A 19 day break of 62% was viewed by the floor as a correction to be bought. The April cattle-April hog spread gained 73 points for the week while the June cattle-June hog spread gained 75 points. Most year cattle will gain 200-300 points on hogs during the month of March.
Cash cattle closed the week steady to down $1.00 from the previous week. Boxed beef total loads, reported to the U.S.D.A. were 3.8% higher than the previous week – but 23% below year ago levels. It appears we are seeing retail and food service (restaurants) buyer reluctance at this $150.00 level (11% over last year).
Beef exports were the second lowest of the year at 5200 tonnes. This was 35% under the previous week and down 48% from the four week average.
Cash cattle, at $90.00-$92.00, still have the potential to advance $1.00 to $3.00 over the next month.
Retail buying for the “grilling” season usually starts the last week of March and continues through May. This buying of “middle meats” may have started early as the primal rib market was $1.00 to $5.00 higher for the week. The primal loin market was steady while “end-meat”, chucks and rounds were down $1.00 to $3.00. It is this “middle meat” buying for steak grilling that gives the cattle cash market its final rally into mid-April. Remember retailers buy their beef product 2 to 4 weeks in advance. This “middle meat” buying should over by the end of April.
Cattle future traders, aware of the above, look to sell June futures during March rallies.
Funds with record long positions will start to “sell-out” their longs before first notice day April 1st.
June cattle futures should be sold on rallies into the end of March. I continue to think late second quarter cash cattle pricing of $87.00-$89.00.
Robert Short
PFGBEST Research Team
rshort@pfgbest.com
Livestock Statistics- Week Ending 2-27-10
3/2/2010
HOGS: (week ending 02/27/10)
Weekly Statistics
- Pork Product (wholesale)
- Loins 115
- Last week 106
- Last year 93
- Loins 115
- Butts 84
Last week 80
ii. Last year 72
c. Hams 78
i. Last week 70
ii. Last year 45
d. Bellies (bacon) 90
i. Last week 90
ii. Last year 73
II. Cash Hogs
a. Peoria $47.00
i. Last week $46.00
ii. Last year $33.00
b. Zumbrota $48.00 (St. Paul)
i. Last week $45.00
ii. Last year $35.50
III. Pork Production (millions of pounds)
a. 437.3
i. Last week 438.6
ii. Last year 444.2
IV. Hog Weight
a. 268.4 (pounds)
i. Last week 268.4
ii. Last year 267.4
V. Lean Hog Index
a. 6912
i. Last week 6716
ii. Last year 5651
VI. Pork Price (13 cut retail average)
a. $2.09
i. Last week $2.06
ii. Last year $2.26
VII. Packer Operating Margin
a. +$2.12
i. Last week +$3.90
ii. Last year -$1.86
VIII. April Hog Premium/Discount to Lean Hog Index
a. +368
i. Last week +249
ii. Last year +439
April hog futures closed the week at 7280 – up 315 points ($1260.00). June futures closed 220 points higher at 8140. July lean hog futures closed 160 points higher for the week at 8047.
Open interest was up 9013 contracts for the week– now at 183,365. Average daily volume of 27,000. This was an increase of 42% from the previous week’s average of 19000 per day.
For the five-day period ending 02/23/10, speculative funds and large traders added a net 928 contracts – now at net long 20916 positions. Non-reportable position holders added a net short by 569 contracts – now a net short 7480 contracts. Adding options finds speculative funds and large traders adding a net 2060 positions to their net longs – now at net long of 32636 contracts. Non-reportable positions added to “shorts” by at net 871 contracts – net short 9956 contracts.
“Managed money” accounts added a large net long contracts of 4621 – now a total net long of 27904 contracts.
Funds came into this week doing very little over the last four weeks. Floor traders were busy establishing “short” positions at a 7050 chart gap. They were looking for the normal seasonal break into the first week of March. Unfortunately for “short” position holders, the monthly “cold storage report” showed January 31st stocks of 495.6 million pounds, 18.4% under last year, and 8% under the last five year average. In addition, January pork exports were 8% over December 2009 and second highest for any month since 2008. As “shorts” began to cover the U.S.D.A. reported Canadian pig imports running 18% under lat years pace.
The final nail in the “bears” coffin came on Friday as the U.S.D.A. reported January hog slaughter down 9.4% from December 2009 and down 10.4% below January 2009. This gave us pork production down 8.9% from December and down 10.8% from January of last year.
Loins are on a two week rally of 11 cents and find themselves 24% over last year. Hams have enjoyed a two week 10 cent rally – now 73% over last year. There was late Friday talk of a 10-15 ham break coming late next week or the following week. Loins are now called either side of steady for the next two weeks. Butts have been quiet all year and should remain near their 84 cent price over the next two weeks. Bellies at 90 cents (23% over last year) could advance five cents over the next two-week period. We should expect to see a decline in the “lean-hog-index” of 200-300 points and a corresponding small break in futures.
I still look for the summer hog index to advance to 8000-8200 (now at 6912). Small hog corrections should be bought.
There are three things we must constantly watch. Did the adverse winter back-up hogs and when weight ready will they pressure hog cash and futures. Will Russia allow poultry and pork imports to resume? So far poultry prices have stayed relatively untouched from the Russian ban. The problem being poultry dark meat (leg quarters) cold storage stocks have increased 23% since the end of December. Russia is our 5th largest market for U.S. pork. In spite of the January 1st ban, pork shows no adverse pricing.
CATTLE: (week ending 02/27/10)
Weekly Statistics:
I. Cash Cattle
a. Texas/Oklahoma $91.00-$92.00 (U.S. dollars per 100 pounds)
i. Last week $92.00
ii. Last year $82.00
b. Nebraska $144.00-$145.00 (carcass hot-weight)
II. Boxed Beef (value reflects US dollars per 100 pounds)
a. Choice $149.96
i. Last week $146.71
ii. Last year $132.71
b. Select $149.56
i. Last week $144.83
ii. Last year $130.55
III. Hide and Offal
a. $9.80
i. Last week $9.68
ii. Last year $6.54
IV. Retail Beef Price (15-cut average)
a. $3.79
i. Last week $3.62
ii. Last year $3.87
V. Beef Production (millions of pounds)
a. 488.1
i. Last week 478.2
ii. Last year 489.5
VI. Packer Operating Margin
a. +$14.35
i. Last week +$15.95
ii. Last year -$22.10
February cattle futures closed the week at 9030 – down 247 points. April closed down 138 points at 9192. June futures down 47 points at 9040.
Open interest increased 4.3% to 314,286 contracts (July 2008 record of 318,000). Volume averaged 36,000 contracts versus the previous weeks 43,000 daily average.
Speculative funds and large traders increased their “futures/options’ net longs by 3247 contracts. This “futures/options” fund buying was offset by commercial selling of a net 3126 positions. Commercials are now a net short 54,906 contracts. Non-reportable positions did little, increasing shorts by a net 122 contracts – now net short 45,160. “Managed money” traders increased their net longs by 3829 contracts. This puts their net long positions at 91,790 – a record. Long only index funds decreased “longs” by 488. This group now a net long 131,780 positions – 36% of total long “open interest.”
Cattle futures experienced a quiet week except for Friday. Long positions holders elected to “sell-out” their long positions in February futures. February closed 9190 on Thursday and “longs” decided not to take delivery on this last trading day for February. Deliveries against February futures can be made through the 5th business day of March. Traders are worried that cash cattle will have a quick two or three cent break into the middle of March. No one was willing to take a 9190 futures cattle if cash would be at 9000 by the second week of March.
Reduced slaughter weights (adverse weather/and a bad beef cut-out) “propped-up” boxed-beef for the third week. We have put +12.06 on the price of boxed-beef over the last three weeks while last year saw a decline of $7.03. We are 13% over last year’s price of $132.71. It appears, in the short term, we have priced beef too high for demand to continue. Boxed-beef reported to the U.S.D.A. were only 998 loads for the week, volume for the last three weeks reported at 3407 loads – 25% under last years depressed volume of 4540. As beef packers “push-lists” (list of unsold product) increase they will cut harvest rates to compensate. This, in turn, will back-up cattle. Add winter weather cattle finally showing up to this short term harvest reduction and we are probably looking at cash cattle highs of $92.00-$94.00 into the first or second week of April.
Cattle futures (forward looking) will anticipate this top two to four weeks in advance. Last weeks reduction in average daily trading volume gives us a clue that futures tops are close. I still expect a second quarter cash cattle low of $87.00-$89.00.
Robert Short
PFGBEST Research Team
rshort@pfgbest.com
Livestock Statistics Week Ending 2/20/10
2/24/2010
HOGS: (week ending 02/20/10)
Weekly Statistics
- Pork Product (wholesale)
- Loins 106
- Last week 104
- Last year 97
- Loins 106
- Butts 80
Last week 80
ii. Last year 77
c. Hams 70
i. Last week 68
ii. Last year 45
d. Bellies (bacon) 90
i. Last week – not tested
ii. Last year 75
II. Cash Hogs
a. Peoria $46.00
i. Last week $44.00
ii. Last year $36.50
b. Zumbrota $48.00 (St. Paul)
i. Last week $46.00
ii. Last year $39.00
III. Pork Production (millions of pounds)
a. 438.6
i. Last week 437.8
ii. Last year 452.1
IV. Hog Weight
a. 268.4 (pounds)
i. Last week 268.9
ii. Last year 268.2
V. Lean Hog Index
a. 6716
i. Last week 6731
ii. Last year 6099
VI. Pork Price (13 cut retail average)
a. $2.06
i. Last week $2.29
ii. Last year $2.32
VII. April Hog Premium/Discount to Lean Hog Index
a. +249
i. Last week +89
ii. Last year -304
iii. Two years ago – not available
April hog futures closed the week at 6965 – up 145 points ($580). June futures closed 115 points higher at 7920. July lean hog futures closed 170 points higher for the week at 7887.
Open interest was down 7019 contracts for the week– now at 174,352. Average daily volume of 19,000 was quite low and 24% under the previous week.
For the five-day period ending 02/16/10, speculative funds and large traders continued to liquidate their net long positions. Futures-only got out of 1415 contracts – still net long 19986 positions. Futures plus options liquidate 821 net long positions. This group of traders still a net long of 30577 contracts. “Managed money” accounts added to their long positions by 936 contracts – now a net long 23,282.
The hog market had a two day rally this holiday shortened week. On Wednesday pork brokers started to talk of a ten cent loin rally this coming week. Thursday found people thinking Russia was about to allow U.S. pork imports to resume. All U.S. exports have been on hold since January 1st. As Russia claims our pork contains antibiotic residue. Russia is our fifth largest importer of pork. This mildly bullish news was heightened when Russia reported January 2010 pork production of 2500 tons. This is 26% under January of last year and 31% less than December.
Floor traders are getting short on the last two week rally. They are hoping the normal seasonal break into the first week of March occurs. They point to the 249 point premium April futures have to the “lean-hog-index” as a very strong reason for this short position. Last year April hogs were 304 points discount to the index. An additional negative argument is our “pork cut-out” is 19% over last year.
Hog slaughter and pork production continues to run 5% to 8% under last year. The biggest reason for this shortage is the very harsh winter weather backing-up hogs into the March period. We have just had a fourteen day rally in April hog futures. April hog futures, three weeks ago, were 250 points discount to the lean-hog-index. We closed this Friday at a 249 point premium.
The bulk of this rally can be attributed to outside markets. Over this three week period gold advanced 4.4%, S&P’s up 4% and oil futures up 10%. These outside markets helped to give us an 8% rally in April hogs. The problem being, the lean-hog-index declined 183 points. The combination of the lean-hog-index decline and April futures advance took April from a discount of 250 points to a premium of 250 points.
In spite of an ok pork product market I would expect local traders to press futures into the first week of March. Funds are long but have been very quiet over the last four weeks. Assuming they stay non-active I would expect a 5-9 day hog futures break of 200 to 300 points. This should be the bottom of futures into the summer months. I still look for the lean-hog-index, now at 6716, to advance to 8100-8300 by late June or early July.
Technically the last three week rally has seen declining hog volume. This week’s average volume of 13,000 contracts is the lightest of the year. Futures that advance on declining volume are always suspect.
CATTLE: (week ending 02/20/10)
Weekly Statistics:
I. Cash Cattle
a. Texas/Oklahoma $92.00 (U.S. dollars per 100 pounds)
i. Last week $89.50
ii. Last year $81.00
b. Nebraska $145.00 (carcass hot-weight)
i. Last week $140.00
ii. Last year $129.00
II. Boxed Beef (value reflects US dollars per 100 pounds)
a. Choice $146.71
i. Last week $140.80
ii. Last year $133.58
b. Select $144.83
i. Last week $138.63
ii. Last year $133.58
III. Hide and Offal
a. $9.68
i. Last week $9.62
ii. Last year $6.64
IV. Retail Beef Price (15-cut average)
a. $3.62
i. Last week $3.57
ii. Last year $3.78
V. Beef Production (millions of pounds)
a. 478.2
i. Last week 464.1
ii. Last year 486.7
VI. Packer Operating Margin
a. +$15.95
i. Last week +$0.80
ii. Last year -$31.95
February cattle futures closed the week at 9277 – a gain of 340 points ($1360.00). April closed up 253 points at 9330. June up 232 points.
Open interest increased 12,600 contracts – now at 301,139. Average daily volume was 43,000.
Speculative funds continue to pile into cattle futures on the “long” side. “Futures-only” saw a net increase of 8096. This group is now net long 79,837 contracts which is a record. Futures/option increased net longs by 9073 positions. This group is now net long 96,817 which is a record. “Managed money” accounts increased their “longs” by 13,185 contracts. This group is now net long 87,961 contracts which is also a record. Non-reportable positions remain quiet as they increased their shorts by 2057 contracts. They are net short 39,144 (futures only). “Long-only” index funds were quiet. They increased their long exposure by 579. This groups now a net long 132,267 positions.
Beef packers, trying to maintain margin, have pulled back on weekly kills the last several weeks. Add a more than normal seasonal decline in “dressed” cattle weights (winter weather) and we have reduced weekly beef tonnage. This reduction in beef production gave us a 4% rally in the boxed beef market (largest week of the year) and a corresponding 3.8% increase in February cattle futures. Boxed-beef is now 10% over last year. Talk on the trading floor is “have we priced beef out of near-term business.”
Past years of adverse winter weather shows a cash cattle market that increases more than its seasonal would indicate. This suggests we might take the cash cattle market to $94.00-$95.00 (now $92.00) by mid-March or early April.
China’s hold on our poultry exports is still in effect. In spite of this “pipeline” backup leg quarters are still holding 37 cents per pound.
Beef demand at food service (restaurants) is still lacking according to the National Restaurant Association.
Friday’s cattle-on-feed was slightly bearish for June futures as placements were 3% over the average analyst guess of 95%.
It is time to reverse our penchant for buying cattle futures. In all probability we will take the cash cattle market (now$92.00) to $94.00. April cattle futures at 9330 (Friday’s close) are close to this price. Futures traders will be looking to sell rallies over the next few weeks in anticipation of this early seasonal top.
Funds remain the “wild-card”. They have spent the last six weeks adding an amazing number of “longs” to their already large “net-long” positions. Assuming there is a let-up in this frantic pace, we should expect an early seasonal top in futures. Most years we top futures by the second or third week of March as traders anticipate the seasonal high for “cash” cattle in April. Today’s boxed-beef prices (10%over last year) will intensify floor trader’s efforts to sell rallies over the next several weeks.
I expect April cattle futures are within 100-200 points of their spring highs. It is also possible that we have topped April and June futures last week.
I expect cash cattle to stay between $92.00-$94.00 through April and then decline seasonally to $87.00-$89.00 by late June.
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.