Daily livestock report apr 03 2013


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Daily livestock report apr 03 2013

  1. 1. Sponsored by Vol. 11, No. 62 / April 3, 2013  So about that “bearish” Hogs and Pigs report from last FI PORK PRODUCTIONThursday —- it certainly hasn’t played out that way yet. Prior to Tues- Avg. 07-11 2012 2013day’s overnight session, CME Lean Hogs contracts had pretty much Mil. lbs, carc.gained value across the board since the release of inventory estimates 525that were generally higher that expected. Why the positive reaction tothe negative report? We think it is probably a matter of the hog and pork market 485crying a collective “Enough!” after a couple of months of decidedly badresults. June Lean Hogs futures began 2013 at $99 and touched $87 445on March 20. Cash hogs (national negotiated net price) began the yearat $83, touched $91 in early February and have now retreated into the 405low $70s. The cutout value has fared even worse, beginning 2013 at$81, reaching a high of only $86.81 on February 1 and falling to a year-to-date low of $77.21 on March 28, the day of the latest USDA report. It 365is not unusual for hog and pork prices to move sideways through Marchbut this kind of decline is a bit of a surprise, especially relative to expec- 325tations of higher prices after last summer’s cost run-up. J F M A M J J A S O N D There are a number of reasons for the struggles and virtuallyany of them would not have been a big problem had they occurred in RATIO OF CHOICE BEEF CUTOUT TOisolation. Put them all together and you have a set of hurdles that themarket has yet been able to clear with any degree of sustained suc- 53-54% LEAN PORK CUTOUT 2.80cess. FI pork production has been higher, year-on-year, in 8 of 13 2.60weeks so far in 2013 and was 1.5% higher for the four weeks that end- 2.40ed last Friday (basically the month of March) on slaughter that was2.1% larger. Year-to-date production based on daily data is slightly 2.20lower than last year but the recent surge of hogs has put cash pork andhog markets on their heels. o2.00 i t a Demand has, by most measures, been soft and there are sev- R 1.80eral reasons for it. 1.60 The self-employment tax increase of January 1 basically clipped 2% off everyone’s incomes so far in 2013 and the reports or re- 1.40 duced consumer traffic and buying have been widespread, even 1.20 hitting “always low prices” Wal-Mart who has long been considered the retailer that wins when times get tough. 1.00 Unemployment remains well above 7% even with some steady 2008 2009 2010 2011 2012 2013 gains in total employment. some lift to pork values. That lift could become very strong indeed if Per capita disposable income plunged in January to a level lower Choice beef prices ever crack the $200/cwt. barrier and we still believe than one year ago after very respectable showing in November and that is likely as steer/heifer slaughter totals tighten to reflect the smaller December — results we believe were due to bonuses paid before feedlot placements of this past winter. year-end so as not to be subject to the 2% FICA tax increase. And chicken could provide some help as well. In spite of broil- But there are signs of opportunity. Chief among them, in our er production that is, year-to-date, 3% higher than one year ago, chick-opinion, is the current under-priced status of pork, especially relative to en prices are near or at record levels. The national composite broilerbeef. As can be seen in the chart at right, the ratio of the Choice beef price has been over $105, a level never before reached, for the past 4cutout to the 53-54% lean pork cutout reached a new record high of weeks. Boneless skinless breasts are back above $1.50/lb. and leg2.558 the week of March 16. It has since dropped to 2.454 but that quarters are approaching year-ago levels, likely due to increased inter-multiple is still larger than any seen prior to last December. Beef is very est from Russia in the absence of U.S. pork and beef imports. Our cal-expensive compared to pork. We think that means pork will gain fea- culated broiler cutout value moved above $1/lb. last week for the firstture space as the weather warms and grilling season begins, providing time since August. The Daily Livestock Report is made possible with support from readers like you. If you enjoy this report, find if valuable and would like to sustain it going forward, consider becoming a contributor. Just go to www.DailyLivestockReport.com to contribute by credit card or send your check to The Daily Livestock Report, P.O. Box 2, Adel, IA 50003. The Daily Livestock Report is published by Steve Meyer & Len Steiner, Inc., Adel, IA and Merrimack, NH.   To subscribe, support or unsubscribe visit www.dailylivestockreport.com. Copyright © 2013  Steve Meyer and Len Steiner, Inc.  All rights reserved.  The Daily Livestock Report is not owned, controlled, endorsed or sold by CME Group Inc. or its affiliates and CME Group Inc. and its affiliates disclaim any and all responsibility for the informa on  contained herein.   CME Group®, CME® and the Globe logo are trademarks of Chicago Mercan le Exchange, Inc.   Disclaimer: The Daily Livestock Report is intended solely for informa on purposes and is not to be construed, under any circumstances, by implica on or otherwise, as an offer to sell or a solicita‐ on to buy or trade any commodi es or securi es whatsoever. Informa on is obtained from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or  possible where projec ons of future condi ons are a empted. Futures trading is not suitable for all investors, and involves the risk of loss. Past results are no indica on of future performance.  Futures are a leveraged investment, and because only a percentage of a contract’s value is require to trade, it is possible to lose more than the amount of money ini ally deposited for a futures  posi on. Therefore, traders should only use funds that they can afford to lose without affec ng their lifestyle. And only a por on of those funds should be devoted to any one trade because a  trader cannot expect to profit on every trade.