MORNING MEATS 04/23/13
CATTLE: Cash cattle last week $126-126.50. Neb. dressed $200-202.00; On 124 boxed loads cut outs: choice up. $.68 at $190.78, select up. $.04 at $183.67 on moderate demand. Carcass Equivalent: $181.29 up. $.05.
COMMENTS: “Not bad”… yesterday’s reaction to the cattle on feed report and overnight’s reaction to the Cold Storage report that showed beef stocks up 4.7% on year and up 2% on average, to a record high end-March level. Hence the futures discounts bulls have been scratching their heads over. Besides another long probe in the $119’s as mentioned, the premium of the cash to the June is becoming “livable” since prices have been stabilizing. Weather forecasts are warming some but this week with rains and generally uncomfortable for BBQ’ing. So I say: let’s break cash $2-4.00 making time for the weather to cooperate, narrowing the cash/futures spread and look for a rally into mid-May? Charts are near term/long term negative with current action in limbo. Open interest rose 3,277 even as April falls 1557 amid moderate volume.
Interior cash hogs yesterday mixed at dn. $.20/up $2.31, rough avg. $77.00; cut outs up. $1.45 @ $84.54; lean index as of 04/19 at $81.09 dn. $.23.
COMMENTS: Cash hogs back over $80.00 in the west, wonder if part of that weather related. Nonetheless, the new USDA reporting suggests the pork market has been getting legs under it….if this was the cattle discounts we’d look to buy it but June hog’s +$10.00 premium not so much. That’s the problem and June only has a limited time to extend that premium before reality creeps in. Hence I‘ll keep the likely bear defense +$72.25. Open interest rose 1,846 led by June up 1010 amid light volume. Hedgers might need to reduce expectations and use +$90.00 ‘just in case’ for summer hogs.