PFGBEST Futures Training Division

Livestock Market Comments(130)

by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com

Wednesday, April 25, 2012 at 9:25 a.m. Central:

Hogs:

June hogs closed 125 points lower yesterday as they were pulled lower with a limit-down cattle futures market. We put a small 21 cents on product last night, but are still 47 cents lower for the week. Cash hogs were, for the most part, steady yesterday and for the week. Remember, we are in the strongest cash hog season of the year. Cash hog prices go higher from the second week in April into the third week of May, but this year we are still going nowhere.

The lean hog index lost 9 points yesterday (8265) and is down 15 for the week against a 2-year average increase of 20 points for the first two days of this week. June futures are now a 390 premium to the index with July a 527 premium. The 3-year average premium for June is 269 and for July the three year average is 335.

As traders are looking for the normal seasonal strength in pork product and cash hogs in late April into June, we are very slowly putting a bigger than normal premium basis back into futures. For the first time in the last several months we are going to a bigger premium than last year and above the 3- to 5-year averages. This is OK for this time of year, but we will need to see up money on pork product on good daily/weekly volumes in the near future or we will see the higher-than-normal premium basis be taken back to a more normal level.

June hog futures are now 1200 points lower for the last eight weeks with help from a June cattle future break of 1600 points over the last 10 weeks. Both markets worried that high gasoline prices would limit retail demand for red meat. Add in a little “pink slime” scare along the way and yesterday’s California mad cow problem and we now find traders unsure what should be the next trade.

On the plus side for higher seasonal hog futures is the ever-so-slow decline in gasoline prices. We have had a 5-cent correction in the average national gas price over the last two weeks. This is too small to mean anything at the present time, but with oil prices down a little over 6% in the last eight weeks, we will be watching gasoline prices in the month of May. Should prices continue to work lower it could be price supportive going forward,

The near-term negative pork fundamental centers on the retail price of pork. U.S.D.A. retail scanner data for meats shows pork prices in March being 4% higher than December at a time when wholesale pork prices are 18% under last year and approximately 14% under December.

Retailers have elected to keep retail margins on the high side as they are seeing consumer resistance to higher priced beef. That absence of willingness to lower retail pork prices is not an encouraging sign for higher hog futures going forward. Remember, June futures have closed lower for the month of May in five of the last eight years. We already have a larger than normal premium built into present June and July prices. One continued worry is the fact that cash belly prices are still headed lower, This is the first pork item to start higher as slicers gear up for the summer BLT season.

There is not enough friendly daily fundamentals to get long June hog futures. Traders want no part of the short side going into May, but daily fundamentals continue to disappoint.

For the time being we are long June hogs against short June cattle when June cattle traded 2700 or more over June hogs. This spread closed with June cattle 2502 over June hogs and this now gives us a lead big enough to put up with random daily noise. We look to add in the near future. Should pork product and cash hogs start their seasonal higher pricing we will be long June hog futures. At present you can’t be short.

Cattle:

A California dairy cow was found to have BSE (Mad Cow) and this put the market limit-down yesterday. This is the fourth case since December of 2003 and assuming additional cases aren’t found we can forget this 1-day event. There will be some lingering concerns on Japanese reaction as they cancelled all beef purchases in 2004. Nine years after our first Mad Cow case Japan is only buying about half of what they were buying in 2003. There is some floor chatter today about two South Korean grocery chains cancelling U.S. beef, but at present it is only a rumor.

This is the peak demand time for spring/summer pre-bookings of beef. On the plus side we see choice beef up $1.93 for the week with select up $2.62. Unfortunately the two day volume of 319 loads is almost 16% less than last week and 7% under the 343 loads reported for the first two days of this week in 2011.

Cash cattle should be at best steady this week as a large discount in April will allow hedges to be lifted as sellers can take lower money and make up the difference on the lifting of the wider than normal hedge.

We have talked for the last six weeks about the strong possibility of June cattle futures going to contract lows of $112. With a large amount of BSE pressure we closed at $111.57 last night. A normal late April to mid-July cash cattle break would put present cash cattle, now at $122 to $125, somewhere around $105 with June futures in the high $90 area. Most traders think a 4-month break of 30 cents a pound is impossible. I’m not so sure. Where we go into late June and July will depend on gasoline pricing and outside influences and don’t forget that last year June cattle futures had a 10-week correction to the downside of almost 21 cents/lb.

We are short June cattle against long June hogs when June cattle traded 2700 over June hogs. We have a 200-point lead and we will look to add should daily pork fundaments turn for their seasonal better.

Several days ago I told you we could try a short term trade of buying June cattle in the $113.90 to $115.50 area, and that we would not be getting rich on this trade. Hopefully you did use the protective stop at $113.62 to limit the trade to a small loss. Getting caught in a BSE rumor, now fact, is not fun.

We are coming into the weakest demand time of the year for wholesale beef and cash cattle. How much of this seasonal weakness has been priced into the early 10 week correction of over 1500 points (12%) will depend on upcoming box beef prices and volume. At this time of year we want to sell a rally unless beef packers cut daily harvest levels enough to keep a bid on choice and select beef cuts.

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.

Livestock Market Comments(129)

by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com

Tuesday, April 24, 2012 at 9:45 a.m. Central:

Hogs:

We lost 68 cents on pork product yesterday and are 18% under wholesale pork prices last year. In spite of sharply lower prices, daily/weekly pork volumes are little changed from levels of the last few years. Monday’s reported volume of 45 loads is the same as the 2-year average of 44 loads. Traders continue to anticipate the normal seasonal advance in pork product and cash hogs that normally starts at this time of year.

Last Friday’s Cold Storage report was a little on the friendly side as April 1 pork stocks were 613 million pounds against analysts’ expectations of 638 million pounds. This was the reason for hog futures closing 20 to 45 points higher even though cattle dipped 75 to 87 lower.

We now have a 506 premium basis in June futures and a 541 premium in July. As trader psychology is shifting to the friendly side, we see a further premium being put into futures. June hog futures’ premium of 506 goes against a 6-year average premium of 420, while July’s 541 premium compares to a 6-year average of 508. We will need to see wholesale product start to work higher with pork packers paying higher money for cash hogs, otherwise we will be making new lows in the weeks to come.

June hog futures have closed lower for the month of May in 5 of the last 8 years. The average down year finds June down 312 points for the month while the three higher years averaged 237 higher. Clearly, we need to find a bottom for pork product and cash hogs.

June futures closed at 8780 last night; if we don’t see near-term product strength, we may need to go to contract lows of 8450. July went home at 8815 with a contract low of 8790.

After a 7-week downslide in hog futures, traders are trying to find a reason to get long June and/or July futures. We still have not found enough evidence of 18% lower pork prices encouraging any extended interest by retailers to pay higher money on increasing daily/weekly volumes. We are back to being stuck until something changes in the near-term demand picture. At this time of year it is best to be out or long hog futures, but until we find some sustained product strength, we will watch from the sidelines.

We are long June hog futures against short October futures as the only near-term way to trade in the hog complex. This is a seasonal trade at a double bottom on daily bar charts.

Cattle:

Cattle futures closed 75 to 87 lower yesterday as traders decided Friday’s Cold Storage report was a little negative for April 1 beef stocks. The U.S. Department of Agriculture told us that we have 508 million pounds of beef in cold storage warehouses. Since this was 61 million pounds over the average analyst estimate, we got some downside pressure Monday.

We did put 56 cents on choice beef last night, but volume was low at 136 loads. It still appears we have priced ourselves out of retail beef demand after a very large $11.87 choice beef rally over the last 7 days. Retailers held off buying early grilling bookings as they watch prices going to the basement. It is human nature to wait and buy at a later date if you think you can get a lower price. When you fear the bottom may be in, all hell breaks loose and everyone wants to buy at the low. Should this week’s beef volume be as disappointing as last week, we are probably headed lower on the strongest beef seasonal of the year that sees beef prices going lower into July and sometimes early August.

The only positive for cattle futures at the present time is a live cattle market that appears to be in a very current condition in spite of beef packers cutting harvest levels to get their operating margins back to respectability. In the last 3 weeks, we find Texas, Kansas and Nebraska show lists increasing 42,000 head against a 29,000-head increase last year. While these numbers are not that large, they show that we are backing cattle into later delivery dates, and this is putting additional pounds on each and every animal. We would need something out of left field to turn psychology friendly and take some of the discount out of futures. A sharply lower gas price or stock indices going higher would be the motivator, but neither appears to be about to happen.

Decent beef exports have become old news.

We talked last week about the tendency for a large move in cattle futures to be followed with 2 to 3 weeks of indecision by traders as to what the next direction will be. We should be breaking out of this go-nowhere trend no later than next week. At this time it still looks like high gasoline prices are keeping consumers from the beef side of the meat case. June contract lows of $112 still appear to be the direction of least resistance.

We want to go back to being short June cattle against long June hogs anytime June cattle trade 2700 to 2850 over June hogs. This trade made us 450 to 600 points the last time we got in. Let’s try this very strong seasonal trade again.

Livestock Market Comments(128)

by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com

Monday, April 23, 2012 at 11:24 AM

Monday 9:35AM 4/23/12

We did manage to put 63 cents on pork product last Friday and closed the week up $1.08. This is giving traders some hope this morning that our seasonal bottom in wholesale pork product is now here. Last year we lost $1.43 for this past week.

The lean-hog-index was up a small 14 on Friday and closed the week up just 29 points against a three year average increase of 222. We most now see a rally in pork product to encourage pork packers to pay higher for cash hogs, thereby taking the lean index higher into late June. Without this product increase the index will go nowhere and the present June premium “basis” of 461 will be about as far as we can stretch it, unless we get a switch to friendly psychology.

From a technical stand point, it appears June hog futures are trying to make a technical double bottom at the 8732 lows made last Wednesday. Should this chart area hold for the next several days and we do see some continued pork product interest we may be able to try the long side of June. For now we can only watch. Should product continue lower we could see June hog futures going to 8450 contract lows this week or next. At the present time you can be looking at the long side of hog futures, but stay away from the short side.

The monthly Cold Storage report that came out last Friday was mildly supportive for hog futures this week. The U.S. Department of Agriculture reported we have 612.7 million pounds of pork in storage as of April 1^st. This was almost 4% under the average analyst estimate, but pork stocks are almost 7% over last year and this will temper any near term upside unless wholesale product starts its seasonal rally.

We do want to return to the long June hog against short June cattle this morning. Last week’s beef volume is showing that a $9.46 rally in choice beef last week has probably priced beef out of near term demand. Sell June cattle anytime it trades 2700-2850 over June hogs this week.

We are long June hogs against short October hogs and waiting for the outcome. Should pork product now be on its seasonal rally the trade will work.

Cash cattle markets were anywhere between $121.00-$121.50 in Texas to $125.50 in Nebraska. Kansas was stuck in the middle closing unchanged at $122.00.

Boxed beef was a rather ridiculous $9.46 higher in choice and $7.06 on select. You will seldom see a week with this large a price increase, but it appears there will no “legs” under this buying. Retailer were caught short on their pre-booking of early spring southern state grilling interest. This always happens should prices collapse as retail buyers always assume they can buy at a lower price at a later date. When ”push comes to shove” retailers fall over themselves in pushing prices sharply higher to be assured they are being covered on expected upcoming grilling business. Last week’s boxed beef volume of just 947 loads was 20% under the previous week and 18% less than this same week last year. It appears a seven day “buying binge’ is over.

Friday’s monthly Cold Storage report had April 1^st. beef stocks at almost 508 million pounds. This was 11% over the average analyst estimate and 14% over last year. Traders went home Friday thinking export and domestic demand is on the slow side and continue to look for any reason to show-up saying the “buy” side is the way to go. We are quickly coming to our seasonal top in beef business into late summer. If this is all that we can do how can the market not be working lower into the June/July period.

The Cattle-on-Feed report Friday held few surprises. Feedlot sales for March were 96.4% of March last year (1.9% over average estimate) with placements into feedlots at 93.6% against the average analyst estimate of 92.3%. These two numbers puts cattle in the nations feedlots at 11.482 million or 2% over last year and this was the average estimate. All-in-all the report won’t do much for trading on Monday.

It now looks like we have priced ourselves out of any additional retail interest for early May buying. The normal seasonal is for boxed beef spring/summer grilling business to be over by Mat 10^th. This year with gasoline coming down just 5 cents ($3.91/gal.) the last two weeks, we are probably looking at the start of the next move lower for June cattle futures.

We want to sell June cattle against June hogs this week should June cattle trade 2700-2850 premium to June hogs. We would, also, sell June cattle (a stand-alone position) this week should it close below 113.90 by more than 22 points. Should present fundamentals continue to disappoint, June futures will be making new contract lows in the next two weeks.

Last week’s cattle slaughter was down almost 8% from last year as beef packers are trying to get back to positive operating margins. This, in turn, will be seeing cattle weights increase and put more beef tonnage on the market in the coming months. This will not be price supportive going forward.

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.

LIVESTOCK MARKET COMMENTS(127)

by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com

Friday, April 20, 2012 at 1:12 PM

Friday 10:05AM 4/20/12

We put 93 cents on pork product last night and are now up $0.45 for the week against a three year average increase of $2.97.

The lean-hog-index went home at 8265, up 6 for the day and 15 for the week against a three year average increase of 158. June hog futures are a 552 premium to the index with the three year average premium at 887.

Traders are starting to anticipate the normal seasonal increase in pork product that normally starts in late April into late June. Pork belly prices usually start the market higher as “slicers” gear up for the upcoming BLT season. 50 trimmings get a push as Major League Baseball hotdog season comes on stream and pork loins start their normal seasonal up from May 1^st. into the second week of July. As early summer demand starts up we always see a 100,000-150,000 reduction in weekly hog harvest levels from April highs to July lows.

This year the hog market still suffers from negative psychology based on lack of pork demand as high gasoline prices are keeping consumer dollars from retailer meat cases. The pork product composite index is 20% under last year and traders continue to look for increasing pork volume to justify thinking that we have priced ourselves into retail interest. This may now be happening as pork volume for the first four days of this week at 392 loads is up 19% from last year and 33% over the last three year average. Should this size retail buying continue into next week it will be tough to keep traders from the “buy” side.

The only technical support for June hog futures is at 8450 (contract low). We will watch load counts early next week to see if this week’s good volume continues. Should fundamentals turn friendly with psychology shifting to the friendly side, we may be able to get long June futures. At the moment the short side of hog futures is for clowns, fools and jugglers.

Today’s early down is for a news article on Chinese wholesale pork prices being down 19% from last September levels. Traders worry that near term pork exports to China may be in jeopardy. This is putting early pressure on our long June hog against short October spread trade.

We put another $1.32 on choice box beef last night and are now up a ridiculous $8.53 for the week. In six trading days we have put $10.38 on choice box prices. Retailers are now buying everything they didn’t buy as futures imploded 1400 points in seven weeks and are in the process of buying everything they will be needing into late May/early June by late next week. We will be looking to get short June cattle next week, or the week after, looking for our normal seasonal top in box pricing that usually occurs by no later than May 10^th..

We want to return to our old friend short June cattle against long June hogs sometime sooner than later. We wait and watch fundamentals unfold. Negative psychology is still with us as gasoline prices are staying high in spite of oil pricing coming down almost 6% since the last week in March.

When present retail hysterical buying is over we will be seeing June cattle going to $112.00 contract lows and probably into the $90.00’s.

Livestock Comments(2)

by Robert Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.COM

Friday, April 20, 2012 at 1:03 PM

Livestock Report

By Robert Short

We put 93 cents on pork product last night and are now up $0.45 for the week against a three year average increase of $2.97.

When present retail hysterical buying is over we will be seeing June cattle going to $112.00 contract lows and probably into the $90.00’s.

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.

Livestock Market Comments(126)

by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com

Thursday, April 19, 2012 at 9:30 a.m. Central:

Hogs:

We continue to lose money on wholesale pork product. Last night we lost 22 cents and are down a small 48 cents for the week. To hold a 1- or 2-day rally, traders need to see some indication that high gasoline prices have not put a large dent in consumer pork buying.

The lean hog index continues to struggle as cash hogs refuse to go higher (even with fieldwork reducing daily offerings) and this, too, worries traders looking to be long June futures. We went home last night with a lean index of 8259. This is nine points higher for the week against a 4-year average increase of 136.

The last half of April is usually a slight selloff in hog futures, as the basis usually declines as hog futures are being pulled lower with the seasonal start of the normal June cattle break. This year we are losing 296 points on the basis this week as traders continue to question how low pork wholesale prices have to go to find demand.

The pork composite value last night was 7653 and this is down 20.6% from last year. Volume has picked up a small amount as this week’s 3-day pork load count of 282 is 15% over last year.

June hog futures were down 340 points last week with almost all the weekly decline coming on Friday’s 300-point limit down trade. For the first three days of this week we are down another 185 points and this 4-day down of 485 points has left us behind. There was no chance to find a short-term sale into next week.

Pork belly prices were 5 cents/lb. lower last night at 90 cents, 39% under last year’s pricing of $1.47/lb. Present thinking has belly prices finding a seasonal bottom next week as slicers gear up for the upcoming summer BLT season. The pork trimming market will be seeing better interest as baseball season hot dog business steams up. Pork loin and butt business normally shows by the 10^th of May.

All in all, we should be coming to the normal seasonal time for better pork prices, and this year with trader attention solely on retail demand, we will need to see something to the upside in prices accompanied with good daily/weekly volume to convince people that some sort of seasonal bottom is in place. High gasoline prices are keeping trader attention focused on retail pork demand; until this shifts to something else, it will continue to be the main focus of traders.

We are up 60-80 points as I write this, but this still appears to be a small rally in a continuing bear market. The only chart support for June hog futures is at contract lows at 8450. We missed the sale and must wait for fundamentals and technical’s to resolve themselves. We also need to get the cash hog market going higher as this will inspire the lean hog index to begin its normal seasonal rally into late June. There is nothing happening in the short term to hold a rally.

We are long June hogs against short October hogs anytime June is less than a 675-point premium to October. This is a normal spread for mid-April into May and we have some floor help over the last two days. New “naked” hog trades at this time are not possible

We are coming close to going back to selling June cattle against buying June hogs. I need some fundamental hog help and an indication that box beef business is coming to its seasonal peak. The next two weeks should resolve this thinking.

Cattle:

We are in our best beef demand period of the year as retailers are pre-booking spring/summer grilling needs. Box beef prices and daily volume have exploded to the upside the last eight days as retailer put off early beef booking thinking they could always buy later at a lower price, encouraged in this thinking as they watched cattle futures implode 1400 points over a 33-day trading period. Now they are in the middle of covering expected needs before prices go out of sight.

Traders are not sure what to make of the present beef fundamentals. Is this short-term demand going to last, or will high gas prices shut the door sooner rather than later on present beef bookings?

In any event, this retailer beef interest is giving us a rally now. With present psychology still not sure as to how deep the near-term beef demand really is, futures can be pulled lower any day that hog futures should go south…and/or outside markets head to the basement. This was the cause of the 72- to 110-point lower day yesterday (Wed.)

Most futures markets will spend between three and seven days deciding if they should change direction after a decent up or down move. A market that has corrected almost 1400 points in seven weeks can, and usually does, take two to three weeks to resolve what the next course of action should be. It does appear cattle are into this period of adjustment to the rather large sell-off just seen.

The game has now become quite simple – have we priced ourselves into decent beef business going forward, with choice beef falling 10% from its March 6 high of $198.11?

Pork shows no sign of good retail buying with a 9.2% decline from this same date so it’s going to be tough to hold beef rallies past next week unless present demand conditions continue to show strength.

We are long June cattle below $115.50 and hoping for a small rally into the $117.50 to $119.50 area on retailer seasonal interest in booking grilling needs. Don’t look to retire on this trade.

Short cattle against long hogs is back on our radar screens. We wait and watch fundamentals in beef and pork unfold.

Tomorrow (Fri.) at 2:00 p.m. Central we will get monthly Cattle On Feed and monthly cold storage reports.

Livestock Market Comments(125)

by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com

Wednesday, April 18, 2012 at 9:50 a.m. Central:

Hogs:

We continue to lose money on wholesale pork product. We lost a surprise $1.10 last night with hog futures down over 100 points this morning as traders continue to wonder where the bottom will be as product is now more than 20% under last year. Product volume of 162 loads is little changed from the last two weeks, but is 9% over last year.

The June basis is a premium 770 against a 5-year average premium basis of 911; this is close enough to not give any trading direction.

The lean hog index continues to be the problem as cash hog prices are going nowhere as hog weights are doing their normal seasonal gain. If hog prices can’t rally to offset hog weight gains the lean index will not be going higher. With a go-nowhere lean index, we will have trouble holding a rally; we’d have to ask the basis to go over a normal premium as psychology is still negative. It could be possible to add to the premium basis, should pork product rally, but with the continued lower trending wholesale prices, it’s not going to happen.

On the technical side we are out of any chart support until June goes to contract lows of 8450.

We talked last week about the last half of April usually being a downtrending market, but the speed of this present selloff is on the fast side. Traders don’t understand why pork product doesn’t act better being 20% under last year and until this daily worry is forgotten it will be tough to hold any 2- or 3-day rally.

I’m not good at chasing a sharply lower market and this will keep me from selling June hogs. We are buying June against October anytime June is less than a 675 premium to October. This is a strong seasonal spread trade with one floor sponsor doing over 2000 cars yesterday. We won’t retire on any major profit from this spread, but there should/could be 150 to 250 points to be made.

Cattle:

We put $2.21 on choice box beef last night and for the first two days of this week we are up a rather large $4.96 against $2.52 last year. Two day box volume of 625 loads is 46% over last week, 33% over last year and a whopping 79% over this same week in 2010. Retailers were putting off beef bookings as they watched a lower-trending futures market and this told them they could buy at a later day at a lower price. When we have a cattle future rally you then see them come in to buy in case this is the low.

Cattle rallies are still weak-kneed, as traders continue to worry about high gas prices and “pink slime” for grinding meat, although I think the latter has been put to bed and forgotten. One a day like this, when hog futures are headed back to the basement with the crazy aunt, you can see some very serious profit taking from short term longs in the market. For the most part this is the reason for today’s 150 point lower futures market.

Should today’s noon beef wire continue on with friendly daily box volume on higher money we should see cattle making their daily bottom no later than 11:15 this morning. Should today’s noon beef wire be neutral or unfriendly we could see a continued down into the close. The important thing to take away from a day like today is the fact that a very weak hog market precipitated today’s lower cattle market.

We have a monthly Cattle On Feed this Friday at 2:00 p.m. Central. Analyst estimates have March placements down 7.7%, feedlot sales down 5.5% and cattle on feed up 2% from last year. If numbers come out as estimated you might see April and/or June lose to August on back cattle futures by 50 to 100 points over a 2-day period.

We are long June cattle below $115.50 and will stay with the position as box daily volume is picking up on higher money. Like our hog spread, we won’t be getting rich with this trade, but it must be tried at this time of year. It’s unfortunate we don’t have stronger legs under the market.

Livestock Market Comments(124)

by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com

Tuesday, April 17, 2012 at 11:45 AM

Tuesday 11:42AM 4/17/12

The hog futures market has left people confused as to what we are doing. At a time like this you will see traders revert to trading hogs on a spread basis.

We want to buy June hog against selling October. The spread is trading June premium 630. Don’t pay over a 675 premium. The spread is trading at contract low and we have six years of history to say this is worth trying.

Livestock Market Comments(123)

by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com

Tuesday, April 17, 2012 at 9:10 a.m. Central:

Hogs:

We did put 84 cents on pork product last night against a 4-year average increase of 40 cents. This is giving us the small 25- to 40-point rally this morning along with a cattle futures market being 40 to 60 points higher.

No one has any good idea as to why hog futures went limit down on Friday and another 150 points lower yesterday. Usually, when we don’t know what took a market sharply higher or lower, we blame funds. While the last half of April is usually a soft time for June hog futures, a 450-point two day break is a bit extreme.

June hogs have now closed below a 66% retracement of their contract high to low (9020), and from a technical bar chart viewpoint, they could be headed to their contract lows of 8450.

Wholesale pork product is down almost 20% from last year levels, but daily/weekly pork volume is nothing special. Yesterday we moved 38 loads and this was almost 10% less than last week and 24% less than last year. While it is easy to drag out negative fundamentals after two sharply lower trading days, it is almost impossible to justify the extreme down in hog futures. At least we are not long.

June hogs went home seven trading days ago with a premium basis against the lean hog index of 1098. Last night, June closed at a 608 premium against a 5-year average premium of 923. This 300-point difference doesn’t give us any clue as to what we may want to do in the near future.

Pork product almost always start to act better the last half of April as harvest levels start to decline seasonally and product finds a “bid.” Even with a healthy 84 cents up in product last night, traders are still trying to justify the Friday into Monday break. Since there are no reasons, this fear is keeping buyers out of the market. Traders always trade fear before fact. I’m lost as lost gets. We stay out for the time being. No opinion, but should product continue higher this week with futures going lower, we will be looking to get long.

Cattle:

We put a rather large $2.75 on choice box beef last night and an even larger $3.16 on select. Daily box volume of 160 loads was not impressive, but was big enough to not worry traders. This large up money in Monday box prices is giving the early 30 to 60 higher market.

Choice box prices are now down 10% from their first week of March highs and almost 5% under 2011 prices. Last week’s large box volume of 1190 loads was 12% over the previous week and almost 6% over last year. This is giving traders the opinion that we may have priced beef into retailer interest as this is the most bullish time of the year for beef bookings. This possible shift in near-term psychology is making traders nervous about being short futures after their 7-week, 1300-point selloff.

We were trying to buy June futures yesterday in the $113.90 to $114.50 area and did get June into the $114.25 area around 12:40, as weekly showlists were being reported 25,000 higher than the previous week. Hopefully you were able to read the daily comments and get long. We’re not going to retire on this trade, but it is something that must be tried.

This small bump up in futures will now need to be fundamentally fed. The first thing to watch will be daily box volume. The question that needs to be answered is whether there is any beef business that has been held back as futures sold off. Many times, retailers will put off buying long-term needs if they see futures going to the basement. They feel they can buy at a later date at lower money. This is a natural human emotion and we now watch to see how this plays out. For the short-term we are long, but for the long-term we are looking to sell June cattle on April rallies.

Livestock Market Comments(122)

by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com

Monday, April 16, 2012 at 9:50 a.m. Central:

Hogs:

Helped by a limit down in futures this past Friday, pork product lost a rather large $1.81, and for the week, product was down $1.53 against a 3-year average pork product rally of $3.06. The lean hog index continues to struggle as it lost 17 points for the week against a 3-three year average gain of 184.

June hog futures lost 313 points from their premium basis for the week and went home Friday a 772 premium against a 4-year average premium basis of 1102. We continue to find June hog futures trading a less-than-normal premium as traders continue to worry about red meat retail demand being lost to high gasoline prices.

We talked early last week about the normal seasonal for June hogs to rally into the middle of April and then have a typical seasonal correction into late April. The biggest reason for this last half of April bearishness is that a normal decline in cattle futures helps to take basis premium from hog futures. This year, we don’t have a big basis, and cattle futures are already on a 7-week selloff of over 1300 points. So, Friday’s 300-point (limit down) move was a little overdone for weekly fundamental product news.

There was some floor trader chatter late Thursday and Friday about Chinese pork production being up 4% for the first quarter, and this may have had a negative influence for Friday trading.

June hog futures closed at a 66% retracement of their contract high to low on Friday (9012). The only technical support is at the contract low of 8450. We are getting early follow-through selling this morning with hog futures down another 120 to 140 points.

I have no near term-opinion for trading this week. It’s the wrong time to chase a 2-day break of 450 points, but there is little reason to think a short term bottom is in. We will be looking to return to selling June cattle against long June hogs in the not-too-distant future, but for now we do nothing.

Cattle:

Fundamentals have turned for the better in cattle. Choice box beef price is 4.3% less than last year and closed the week up 90 cents against losing $2.63 last year. Weekly box volume of 1190 loads was 17% over the previous week, 22% over two weeks ago and almost 6% over this same week last year. While these numbers won’t break the bank, they are large enough to keep a bid under April for this week into next week. At least for the short term, traders are beginning to think we have priced box beef at a price that will see some retail interest over the next several weeks.

Cash cattle was $2 higher in Nebraska last week at $122 to $123 with trader talk of $125 by late next week. In spite of a weekly average negative operating margin of $104.92 (negative $36.85 last year), tight feedlot cattle supplies are keeping further cash corrections for this week into next at a minimum.

If we had more than two weeks to trade April cattle futures, I would tell you to be long into next week. Trading the long side of June this week into next week is a lot tougher as June is the seasonal weakest contract of the year. Since we should have made somewhere between 600 and 1200 points being short June above $128, let’s see if we can make 150 to 300 points in a short-term trade in June. Let’s buy June cattle futures in the $115.50 to $113.90 area should the market trade in this area the next several days. Please remember, this trade carries some risk. We are trying to get a bounce in what has been one of the best down trending markets of the past 10 years. With this in mind, we would put a protective stop at $113.62 and make the market trade under this number for more than one hour before liquidating the long position.

Livestock Market Comments(121)

by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com

Friday, April 13, 2012 at 9:30 a.m. Central:

A small surprise 71 cents lower on pork product last night. For the week we are 28 cents higher in pork product against being $1.40 higher last year. We’re still waiting for our last half of April seasonal pork product rally.

Traders went home yesterday worried that a surprise $1.64 put on pork product Wednesday only got April futures to close 35 higher yesterday and June just 57 higher. Cattle futures closed 210-287 higher yesterday and traders went home last night a little perplexed for today’s direction for hog futures. We have just had our normal seasonal early April hog rally as traders look forward to upcoming lighter harvest levels putting money on pork product and thereby putting money on cash hogs. The six day rally took June hogs from a small 700 premium to the lean-hog-index to a normal 1078 premium last night (4 year average premium is 1168). The near term fundamental problem is the lean index. For the first four days of this week the index is down 23 points against a three year average advance of 229 points. As we now have a normal June premium, we now must see the cash hog market going higher or June futures will have a tough time staying higher.

As I write this June hogs are down 200 points, and while this is probably overdone on the day it shows the apprehension traders feel about holding a rally with no daily help from pork product going higher and/or the lean-hog-index inability to start seasonally higher.

I have no short term idea as to where June hog futures are going. Unless we start to see some multi- day product strength and/or some indication the cash hog market will be going seasonally higher there is little to do. Should product not start higher next week, June may be going to new lows for this move (8982) as traders always expect a short holiday harvest week to produce a higher product market. If this does not happen next week psychology will shift back to the worry of high gasoline prices leaving consumer red meat dollars in their gas tanks. No opinion at this time. Let’s see how things unfold into early next week.

We have managed a two day June cattle rally of 355 points thanks to getting to a key bar chart support price (114.00) at the same time the morning “beef wire” showed beef packers selling a very large 247 loads of box beef. This is all it took to see the two day up as traders didn’t notice we lost an additional $1.38 on choice beef. It continues to look like gasoline has really cut into retail beef demand. Last week’s box volume did increase 8.4% from the previous week and this week we are running 12.5% over last week, but the seasonal increase in box volume continues to come on down money. In the last nine trading days choice box prices have declined 3.7% and for the last few days are under select prices. This continues to make traders think that consumers are staying with cheaper cuts of beef and staying away from the higher priced “middle meats.”

We are staying in the same scenario of a tight supply of feedlot cattle keeping cash cattle firm as weak beef demand continues to erode wholesale prices. This combination is keeping packer operating margins at near record negative levels and this has forced packers to keep harvest levels on the lighter side. This is putting more weight on cattle and forcing larger tonnage on the market at a time when there is little interest by consumers. Until this has played-out we need to be selling rallies. The question, as always, is how high a rally do we sell. At this time I don’t know the answer, but I feel it will be sooner than later.

Choice box beef is 6% under last year with select down 4.2%. As we are in the best demand period for beef we should be able to get increasing volume on increasing prices. So far, halfway through April, we are seeing a light increase in volume with a continued downward spiral in price. We can’t hold a rally unless this changes.

Our strongest negative psychology of the year starts sometime over the next 10 trading days. Traders always know the seasonal decline in cash cattle and box prices that start in late April into early May. Since it doesn’t appear we have reached a price level that will move wholesale beef on adequate volume and prices, we should be going under contract lows (112.00 in June) in the not too distant future. Let’s see if the just past Easter holiday shortfall in harvest produces any kind of box beef price rally by Tuesday/Wednesday of next week. If not, we will return to the short side of June cattle.

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.

Livestock Market Comments(120)

by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com

Thursday, April 12, 2012 at 9:45 a.m. Central:

Hogs:

We put a surprise $1.64 on pork product last night giving us the early 80- to 100-point higher June hog market. Traders always look for a pork product rally after a 3-day holiday shortfall in harvest levels. We are now 99 cents higher in product for the week, but still lag the 2-year average product rally of $2.32.

The cash hog market must turn for the better sooner than later, or the lean hog index will not be able to support the June hog basis at last night’s close at a premium of 1011 against a 4-year average premium of 1190. Be that as it may, we are presently in a period where traders turn friendly as they start to look for the normal seasonal increase in pork product and cash hogs. This thinking is always amplified in mid-April as the start of corn planting makes traders assume that the supply of market hogs will be tightening.

We now need to have June hog futures close above the first of three major chart points at 9380. A close above 9380 could see June going into the 9520 to 9570 area.

We got out of June hog longs yesterday with decent profits, but had I known we would put $1.64 on pork product last night, we would have been adding to our longs that we put on with an average buy in the 9070 area. Sometimes we need a little luck to show up. Let’s wait several days and see how things play out.

A technical close over 9380, with present bullish psychology, should get June into the 9500 area by next week. If you want to try this trade it would be ok, but I’m not going to say it must be done as I don’t see anything to keep cattle going (as any kind of influence on hogs) for any length of time.

Cattle:

Cattle came into good technical bar chart support yesterday in the $114 area at the same time we had a very large 247 loads of box beef reported on the noon wire. As we are in the best demand period for beef, traders lost little time in getting out of short positions. The resulting 75-point higher close in cattle futures helped feedlots get cash cattle $2 to $3 higher last night, giving us the continuation of a 200+-point advance this morning.

This still appears to be our old friend, a dead cat bounce, as choice beef watched a good futures rally yesterday and went lower in pricing into the close. Choice beef at $177.06 is still 55 cents lower for the week against a 2-year average increase of 96 cents. On the plus side, we have better volume showing last week and for the first three days of this week. Box volume last week was 8% over the previous week and for the first three days of this week is running 27% over the first three days of last week. The problem is, we still can’t get up-money on good volume.

Another not-so-happy fundamental is that choice beef is now trading 62 cents under select against a 3-year average premium of $2.80. This makes traders worry that wholesale beef business has seen a small pick-up in volume, but on the cheaper select cuts only. This is always the time of year that middle meat cook-out choice cuts tend to gain over select. Not happening this year, and this will continue to make traders assume high gasoline prices have severely curtailed retail interest.

Some sort of short-covering rally is long overdue and the middle two weeks of April would be the time to expect it. This was the basis for covering our short June cattle that were sold above $1.28. It was also the reason we liquidated our short June cattle against long June hogs that were done when June cattle traded 2800 to 2950 over June hogs.

Unless we see beef packers selling box beef at higher money, accompanied with sustained high volume, we will be looking to re-establish short June cattle in the not-too-distant future. The first strong bar chart resistance is showing in the $118.70 to $122.50 area. I realize this is a large range but we can get closer in the coming days as fundamentals unfold.

We should be out of all trading positions this morning. We are flat with nothing to do but watch.

Livestock Market Comments(117)

by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com

Wednesday, April 11, 2012 at 8:34 AM

Tuesday 3:35PM 4/10/12

We lost 52 cents on pork product tonight and are now down $0.65 for the week against a three year average product rally of $2.39. As we are not getting any fundamental product help this week it may be possible, in the short term, to have a further downside correction. Take profits on your long two units of June hog futures that were put on with a average price somewhere around 9070.

Livestock Market Comments(118)

by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com

Wednesday, April 11, 2012 at 9:25 a.m. Central:

Hogs:

Pork product was down 52 cents last night and is now 65 cents lower for the week against being $1.43 higher last year. The lean hog index was 12 cents lower (8250) and down 17 for the week. The 2-year average for the first two days of this week is an increase of 195 points. With the continued downward trend in the lean index, we now have June hog futures with a normal basis premium of 1085 against a 5-year average premium of 1121.

As we talked yesterday, the switch to friendly psychology has put an additional 373 points on the June premium basis in the last seven trading days. We now must get friendly fundamentals to confirm the June rally of 353 points that started March 30.

Coming off a holiday harvest week – Easter – traders will be expecting the lighter harvest levels to produce lighter product offerings and a corresponding up in wholesale pork product prices. We are still waiting to see if this happens. Most of the time this increase in wholesale pork starts in mid-April.

Trader psychology will remain firm for the rest of this week, but I want to take profits on our two units of June hogs that were done at and average of around 9070. June has not been able to close above 9380, its 38% retracement, and unless product does start higher there is little left to the upside into the middle of next week.

With friendly floor trader psychology, if cattle mount any sort of bounce, we may find June hogs pulled higher. But without this influence, the market could step back 100 to 200 points into early next week.

We will remain in our long June hogs against short June cattle. We did this spread when June cattle were 2800 to 2950 over June hogs and see no long term reason to take profits. Should cattle box volume finally find a short-term bottom on good daily volume and on up money, we may want to take profits. Nothing says this is the case at the present time.

Cattle:

We lost 53 cents on choice beef last night and are now 47 cents higher for the first two days of this week. The 2-year average is to see choice advance $1.40 for the day and $1.43 for the two days. Beef volume has had a small up-tick as 2-day box volume of 428 loads is running 20% over last week and 11% over last year. The problem continues to be the wholesale beef markets, having difficulty with moving any decent daily/weekly volume on sustained up-money.

We are in our peak demand period for retailers to pre-book spring and summer grilling needs, but we need to see more than what the last two weeks has shown.

There was a small number of Texas cattle that traded $2 lower yesterday at $120. This is a decline of more than 8% from our $131 high. We normally get a seasonal correction over 12% into late July or early August. This year, our seasonal June break started four to six weeks early as gasoline went to record prices. Many traders now question whether the market may make an early bottom in May since the break started early. The bottom will be made when we find we have priced box beef at a level that will sustain good volume on up money and not before.

We do have some technical support for June cattle in the $114 area and with box volume picking up, as it should at this time of year, we may finally get some sort of bounce to add additional units to our short June cattle position put on above $128. I don’t see any reason at this time to take profits. Most box business will be over next week, or the week after, and traders know that the seasonal pattern is for June to be the weakest cattle contract of the year. Should huge daily volume show up we’ll have a horse of a different color and would take profits. Time will tell.

We are short June cattle against long June hogs with a 700- to 850-point lead with no interest in getting out. Hopefully, you are still short June cattle above $128 as we wait for a 200- to 350-point short-covering correction to add a second unit.

Cattle open interest is now 345,575 contracts. This is a decline of 8.2% (30,669 contracts) from our March 1 high. Most traders like to see a 20% correction to indicate the lows are in.

Livestock Market Comments(119)

by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com

Wednesday, April 11, 2012 at 12:13 PM

Wednesday 12:11AM 4/11/12

Please liquidate all short June cattle positions. Also liquidate short June cattle against long June hog positions. We are getting increased daily volume on steady money in box beef and the floor is turning bullish. Let’s go to the bank.

Livestock Market Comments(116)

Livestock Market Comments
by Bob Short, PFGBEST
1-800-280-4566
rshort@PFGBEST.com
Tuesday, April 10, 2012 at 9:10 a.m. Central:

Hogs:
We have just had our seasonal psychological rally in June hog futures as traders always anticipate seasonal reductions in daily harvest levels putting money on pork product and cash hogs. This year, we have had a 6-day rally of 353 points. We must now find daily fundamentals that support the psychological rally we have just had. In short, we need to start to put money on pork product later this week and next, or we are in for a 200- to 300-point correction to the downside in June hog futures.

Technical bar charts will turn friendly should June close over 9380. The next stop would be over 9500. We lost 13 cents on product last night against a tiny 1-penny loss last year. We do need to see some strength in product this week or we will be getting out of our two units of June futures with an average price of around 9070.

The June futures rally has now got a basis premium to the lean hog index at a positive 1098. This is an increase of 386 points in six days and we now find June with a normal positive basis for this time of year (5-year average premium is 1121). We are going to need field work slowing hog movement to put a bid to cash hogs in the very near future. Should any day this week produce a pork product rally of over $1, you will see hog futures over 100 higher the following day.

Last year we put $1.44 on pork product overnight, resulting in June hogs closing over 200 points higher the next day. With present psychology, this is what would happen should we see near-term product strength. Until this happens, we are a little stuck for any further up in futures, although most traders are not interested in the short side.

The “skinny” for June hog futures in April is to rally the first half of the month looking for better fundamental news; and when that news shows up, we usually see futures having a tough time holding further rallies into the end of April as hogs are pulled lower with the normal seasonally-collapsing cattle futures. This year, thanks to high gas prices, cattle started their seasonal collapse six weeks early. This should slow the possibility of any late April selloff.

We are long June hogs against short June cattle when June cattle traded 2800 to 2950 over June hogs with no near-term reason to take profits.

We are long two units of June hogs with an average price around 9070. We stay for the time being, but we will need fundamental reasons to go higher. Not seeing this at present time.

Cattle:
Everyone is tired of the cattle sell-off. It’s human nature to look for a break to buy and a rally to sell. A 30-trading-day break of 1373 points will get traders trying to find a reason to try the long side. There is still little reason to expect any 1- to 3-day short-covering rally to hold.
Choice box beef was $1 higher last night after losing a rather large $5.17 last week. Select was even worse as it lost a whopping $7.10 for the week. I’m too lazy to go back and look, but a loss of $7.10 for the week is about as big as it gets. Traders will come into this week looking to see if last week’s sizable correction in box prices will be seeing box volume pick-up as this is the peak demand time for pre-booking of spring-summer grilling business. Yesterday’s box volume of 171 loads was about the same as the previous week and last year, but still nothing special.

Give me some good daily box volume on up-money and I’ll give you a 300- to 400-point rally. Without this, we are going to continue lower. What bothers me is that if this is as good as we can do during the middle of April, what can we expect during the seasonally weak months of May and June?

I still believe June will have to go to contract lows around $112, and should box beef prices continue their seasonal decline into May, we should see new contract lows in June. Always remember, all bear markets open higher and close lower.

We are short June cattle futures above $128 and continue to wait for a short covering rally (dead cat bounce) to add additional units. We are also short June cattle against June hogs with over a 600-point lead and there is no near-term reason to take profits.

Livestock Market Comments(115)

Livestock Market Comments
by Bob Short, PFGBEST
1-800-280-4566
rshort@PFGBEST.com
Monday, April 9, 2012 at 9:45 a.m. Central:

Hogs:
We put 39 cents on pork product Friday, but closed the week down $1.43 against a 2011 weekly gain of 30 cents and a 2010 gain of 48 cents.

The lean hog index lost 60 points for the week against being 282 higher last year and a rather large 548 higher in 2010. Ongoing U.S. corn planting this week along with a large Saturday hog harvest to make up for Easter reductions should find cash hogs going higher this week, and that will improve the lean hog index. Psychology had its normal seasonal shift to the friendly side two weeks ago; since then, we have added 518 points to the June hog basis. June futures went home Thursday with a 1085 premium against a premium of 942 last year and a 5-year average premium of 1232. In other words, we have put a normal premium back into June hog futures looking for our normal mid-April product going higher on reduced kills as farmers turn to corn and soybean planting.

To keep this 5-day rally going higher we will need to get the lean hog index to start working higher. A cash hog rally will do this.

A daily bar chart shows the first level of resistance to be in the 9380 to 9400 area with much better resistance in the 9500 to 9510 area. Best possible upside from a bar chart would put June in the 9620 to 9680 area, but we will need to see some help from cattle going higher to get into the 9600 area and/or a better pork product market with a increasing lean hog index.

We are long two units of June hog futures with an average around 9080. Let’s stay with this for the next several days and see what happens to pork product and cash hogs. We now need to get fundamentals to confirm friendly psychology.

We are long June hogs against short June cattle when June cattle traded 2800 to 2950 over June hogs. We went home with June cattle a premium of 2230 and with this lead I see no reason to take profits unless cattle box beef volume picks up.

Cattle:
Beef packers continue to find their operating margin at all-time negative prices. Last Thursday their margins were a negative $120 a head for a new all-time high. They have no choice but to cut weekly harvest rates (putting more weight on cattle) and trying to break cash cattle. Last week beef packers did buy cattle $3 to $5 lower with most cattle trading in the $120 to $122 range.

Choice box beef traded a large $5.16 lower last week (last year 81 cents higher), and select traded a whopping $7.10 lower against last year’s increase of $2.06. Weekly box volume did pick up to 1,060 loads. This was 8.4% over the previous week and 12.6% over last year. Choice beef has now had a 10.6% decline from its $198.65 high on February 28, but volume is still not what you would expect for the best beef demand time of the year.
Cattle open interest is starting to decline as should be expected with a selloff of this size. Total open interest did decline last week by 9,443 contracts and should continue should futures rally as many stuck longs need to exit. One of the rather strange things on this 6-week cattle selloff was to see not much of any decline in open interest. This will change over the next few weeks and limit any corrective bounces.

If there is any retailer beef demand for beef it must show this week and/or next week. After that, psychology always looks into June and sees a cash cattle market that declines 10% as box beef declines 12%. The game this year will be to see if the large correction in box beef prices give us a contra-seasonal rally in beef.

National gas prices increased again last week and now stand at $3.93 a gallon. This is a little surprising as oil futures are down over 7% from their late February highs.

We are short June cattle above $128 with no chance to add as upside profit-taking corrections have been next to nothing. There is a strong possibility that traders will be getting long the April cattle butterfly this week, and if this happens, it would put additional selling pressure on June.

We got short June cattle against long June hogs when cattle traded 2800 to 2950 over hogs. There is nothing here, at the moment, to tell us this spread won’t continue to work. The only thing to watch this week will be box beef volume to see if any new business is showing on this rather large break in pricing. At this time there is no reason to take profits.

We are long June hogs against short June cattle when June cattle traded 2800 to 2950 premium to June hogs.

Livestock Market Comments(114)

by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com

Thursday, April 5, 2012 at 9:30 a.m. Central:

Hogs:

We’re experiencing a normal seasonal rally on psychology shifting to upcoming lower hog harvest levels. It’s taken pork product and cash hogs higher, and brought June futures 260 higher from their lows made five days ago.

We are going above a fairly strong bar chart downtrend line this morning and this should add some technical strength to present bullish psychology.

If outside markets do not overtake things, into the middle of next week, we should be able to get June futures into the 9380 area. Whether we “hold or fold” at this area will depend on pork product turning better and/or field work slowing daily hog movement (which would give us a cash hog rally.)

Cash hogs going nowhere with increasing mild weather weight gains continue to push the lean hog index lower. June futures have added 220 points to their basis this week, closing on Wednesday with a 932-point premium against last year’s 1078. We can only push this basis so far without some increase in the index. Last year for this week, the basis was up 231 points.

We had a chance to add an additional unit to our June hog position late yesterday. June futures did trade below 9140 twice before closing at 9200.

Hog futures may get a little upside help this morning should cattle futures find profit-taking that usually shows up as we go into a 3-day weekend.

I don’t see anything worth talking about this morning. So I repeat: we are long June hogs for a normal shift in psychology that should now be helped with June going above a very strong downtrend line on daily bar charts. Field work next week should keep a needed bid to cash hogs and this should get us to the 9380 area. Assuming we get there in the next several trading days, we’ll then need to find constructive fundamentals to confirm this rally. ‘Nuf said.

We are now long two units of June hog futures with an average price somewhere close to 9080. We are long June hogs against short June cattle when June cattle traded 2800 to 2959 over June hogs. This spread went home last night with June cattle at a premium of 2312. You couldn’t blow me out of this with a hand grenade. Hopefully we get a rally to add to it!

Cattle:

Poor cattle futures. We seem to be having a race to the basement with June futures losing 1373 points ($5,492) in the last 30 trading days. We are now in the best seasonal demand time of the year for beef, as retailers are busy pre-booking spring into early summer grilling needs. The problem, as we all know, is there is only box beef business on sharply lower money. This, in turn, has beef packer operating margins at close to record negative prices. This is presently causing packers to bid lower for cash cattle and feedlots are selling at lower money as negative psychology has April futures at a $4 discount to present $122 prices for cash cattle.

Feedlots taking lower money for cattle is being offset with their ability to cover hedged cattle with a profit that offsets their selling at lower prices. This probably comes close to guaranteeing that cash cattle will be working lower the next several weeks.

Any one-way futures market going into a 3-day holiday will usually see profit taking by traders putting their trading gains in the bank. This is giving us the early rally this morning.

Choice box beef is $2.13 lower for the week with select down a large $4.03. Last year for this week we had choice up $1.85 and select up $1.89. Weekly box volume of 623 loads is a little over 2% less than last week and nothing special with what we have been losing on prices. Unless something changes on demand fundamentals next week, we are not going to be able to hold any 1- to 3-day rally. We are really in a one-way down market that could continue for another 500 to 700 points as open interest has not had any correction on this rather large sell-off.

Remember, June futures are down almost 1400 points, but last year they broke 1900 points.

We are short June futures above $128 and continue to hope for a rally to add. Our short June cattle against long June hogs came in this morning with a average lead of 563 points ($2,252) and we continue to hope for a rally to add. Usually when you wait and hope for a rally that you can sell you never get it.

If something doesn’t change for present demand fundaments we may be watching June futures have the longest sustained down in any cattle futures contract since they were listed for trading in the early 1960’s.

Historically yours,

Bob Short

Livestock Market Comments(112)

by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com

Wednesday, April 04, 2012 at 4:34 AM

Tuesday 4:27PM 4/3/12

We lost a rather large $1.53 on pork product tonight against a two year average of putting $1.66 on product. In addition, two day pork volume is the same as last week and almost 8% less than last year even with wholesale pork being priced 18% under last year.

We are looking to add to present long June hogs, or getting long, in the 9070-9140 area. Let’s wait a day and see what happens tomorrow.

Livestock Market Comments(113)

by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com

Wednesday, April 4, 2012 at 10:00 a.m. Central:

Hogs:

I’m writing this a little late this morning as I want to see what hog traders do with a surprise loss of $1.53 on pork product last night. So far, it appears that normal friendly psychology for hog futures to rally the first half of April is in place. Cattle futures continue their non-stop rush to join the crazy Aunt in the basement and hogs just watch. Hog traders always turn friendly to hog futures in April as they start to look ahead to better pricing in pork product and a firmer cash hog market into summer. The $1.53 product decline last night gives us a 2-day down move of $1.55 against the 73-cent higher product prices a year ago.

We have put an additional 186 premium on the June basis this week as psychology shifts for the better.

June futures closed Tuesday with an 898-point premium to the lean hog index against a 6-year average of 1348. The one problem that stays is the lean index price. Cash hogs continue lower this week and the index is currently 61 points lower for the week against a 2-year average increase of 162. In other words, as hog futures rally, and the lean index works lower, we are putting ever higher premiums on the June hog basis. This is ok at this time of year, but for a sustained rally, we will need to find a near-term bottom to cash hogs. Traders know the strongest seasonal in cash hogs starts the second week of April into the third week of May, and this is keeping current psychology friendly.

You may be long from my less-than-enthusiastic recommendation of last week. We talked about the long side of June at their 66% retracement of the contract (9020). Let’s continue to look at adding a second unit should June trade in the 9070 to 9140 area in the next several days.

Watching today’s trading seems to confirm traders want no part of the short side in early April.

We are long June hogs against June cattle when June cattle traded 2800 to 2950 over June hogs. We went home last night with June cattle 2440 over June hogs. We must add a second unit sometime this week or next.

Cattle:

Choice box beef was down a fairly large $1.01 last night for a 2-day down of 28 cents against a $2.18 higher choice market last year. With almost record negative operating margins, beef packers have no choice but to try and break the cash cattle market this week. This was done late yesterday as cash cattle traded $3 lower at $122. We talked yesterday, or the day before, of this possibility as April cattle futures traded close to 400 points under cash cattle and it would be easy for feedlots to sell at lower money as they could cover their short hedge, thereby making up the lower money they accepted for their cattle.

We are in the best demand time of the year for box beef. We are still waiting to find if April brings any upside to wholesale beef prices. At the present time it still appears we are headed lower.

We are short June cattle above $128 and continue to look for any 2- to 3-day rally to add additional units. If nothing changes we may be going under contract lows ($112) sooner than later.

The only slightly positive thing is the 3-day holiday (Easter) weekend just ahead – and traders always worry about a trend change in direction. One other thing to watch is the technical correction that is occurring in energy (oil) futures. Should oil continue lower into late April we may find traders taking profits. Other than these two minor problems there is no way to know how low June may go. We are down almost 1400 points from our late February high, but traders remember last year when June broke 1900 points.

We are short June cattle against long June hogs with an average profit of 445 points. We look to add a second unit should we put together a 125- to 250-point rally.

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