PFGBEST Livestock Market Comment

CHICAGO - Nov 24/09 - SNS -- Following is the livestock futures comment from PFGBEST Research.

Livestock Statistics Week Ending 11-14-09

HOGS: (week ending 11/14/09)

Weekly Statistics

1. Pork Product (wholesale)

   1. Loins 82

      1. 2.4% lower than last week (84)
      2. 13% lower than last year (94)

1. 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 13^th.   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 19^th.

                      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).

PFGBEST Research Team

Phone: 800-361-6855 or 319-553-2181

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