Steve Wagner CHS Hedging Livestock Comments, August 1st 2014

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stevewagner

Macro:                                                                                                                                  

The S&P was up 2.00 points at 1,965.00; the Dow was off 28.0 points at 16,817.00 The Dollar index was up .205 trading at 81.412. Gold was off $2.80 per ounce trading at $1,296.20. Crude oil was off $1.35 at $99.62 per barrel.

Grain markets mixed today; corn closed up ½ cent. November soybeans closed down $.13 ¾ cents. Mpls spring wheat closed 2 ¼ cents higher and December soybean meal was off $5.70 at $348.60 per ton.

China is expected to buy 3.84 mmt of soybeans for August.

Russia is threatening that if sanctions increase on them for the Ukraine they may retaliate by restricting chicken imported from the US. Russia is the second biggest importer of chicken behind Mexico.

            

Cattle:

  • August live cattle futures closed $1.175 per cwt higher at $159.95 today. There has been no cash trade so far this week; however, stronger box beef has traders expecting cash will be $1 to $2 higher this week.
  • Feeder cattle traded to record highs in August $223.50, October $224.275 and November $223.375 all higher on bullish box beef and cheap corn. This is the biggest rally in feeder cattle in 37 years.
  • Packer margins remain quite strong at $67.55 per head, despite the expectation; packers will have to pay up to get cattle.
  • Box beef hit record high prices again today, choice box beef was up $1.52 per cwt at $262.86 and $260.83 for selects, load count was 178. One growing concern is that middle meats are sluggish and ground beef can’t carry this market. Wholesale beef has rallied 31% so far this year.

 Hogs:

  • Lean hog futures opened lower and closed sharply lower on cheaper cutouts and cheaper corn prices. August lean hogs were off $3.00 per cwt at $118.45, December lean hogs were off $3.00 per cwt at $93.70. December lean hogs are at a $24.60 discount to the August, the 5 year average is $12.90 per cwt.
  • Packer margins remain strong in pork, currently packers are at $12.07 per head profit for July 29th.
  • The PED virus appears to be slowing with 78 cases reported last week vs 92 the previous week and 315 from the peak back in February.
  • Russia has decided to temporarily suspend subsidizing farm loans for new pork production. That has caused Victor Biryukov of Talina’s (Russia’s largest hog producer) to suspend expansion plans; the increased production would have added 12 to 30 tmt of pork to Russia’s production.
  • Russia is struggling with pork imports after restricting pork imports from the EU. Lithuania and Poland had an outbreak of ASF which is deadly to pigs but has no effect on humans.

 chshedging.com

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