Please feel free to visit my website www.alpine-trading.net and sign up for the daily newsletter via email:

LIVESTOCK COMPLEX COMMENTS

The overall livestock & meat continues to see growth in consumption year after year, but the majority of consumption increases are occuring in the poultry sectory (broiler and turkey industries) and in pork. This makes senses as the driving emerging markets are in the Middle East and in China where traditionally those markets are not consuming beef & veal but rather poultry and lamb in the Middle East and pork in China and Asian nations.

World Meat Production 2014 (forecasts)

Beef & Veal 58.856 mln mt (+ 0.4 % 2013)

Pork 110.703 (+ 1.1 % 2013)

Broiler & Turkey 90.799 (+ 1.5 % 2013)

Increases in consumption on world level have only been small in beef at 1.47 % (from 2009-14), while in pork we have 10.01 % increase (2009-14) and 14.16 % increase in broilers & turkey sectors (2009-14). However, even with the prospects of only slight increases in demand year to year, we still see faily good trade occuring in the export arena as Brazil and India remain the top 2 exporters of beef. Total 2014 exports are forecasted at 9.514 mln mt vs. 7.827 (2010, + 21.55 %) and 9.202 (2013, + 3.39 %).

We also have seen an increase in beef demand in Chinese market as sluggish demand for poultry continues due to H7N9 outbreak. Other exporters, like Australia and Uruguay, make up the majority of trade to China, as Brazil, India and U.S. are not able to ship there. China, Russia, EU and Japan will continue to be net importers and will rely on strong exporters like Brazil, Argentina, India, and Australia. U.S. continues to have the largest domestic consumption in the world at 11.172 mln mt, but has fallen off in the 2009-14 time frame by 7.19 %.

I believe that we have topped out for the year in the live cattle & feeder cattle markets and we could see weaker levels in the next few months.

The outright futures dont necessarily show a sign a slowing down to the upside as we could see a technical rally to test recent highs. However, I would look at the Dec/ Feb live cattle spread to see price action has been weak over the last few weeks.

I believe that the weakening spreads will probably continue to press live cattle futures (basis the dec) over the next several weeks to 150 level and feeder cattle prices (basis the Nov) to 210 levels, currently at 218.

Pork is forecasted to see increases in production in China up to 57 mln mt with increases in consumption as well to 57.44 mln mt, while the U.S. maintains its status as the largest pork exporter in the world at 2.2 mln mt although it was a slight decrease from 2013. Production overall in the world is expected to increase to 110.703 mln mt despite the PED virus impacting the U.S. and other producing countries as well as the ASF in the EU. Nonetheless, domestic consumption is forecasted to increase in 2014 to 110.435 mln mt (+ 1.2 % from 2009).

We also have to keep in mind moving forward into U.S. grain fall harvest as fairly large crops (14.5 bln bu corn, 3.9 bln bu soybeans) are expected, so long term there will probably be great incentive in my opinion to put more animals on feed. It is the same time when we usually will start to see fall in demand from the U.S. markets.

I believe the key tell-tale sign of the impeding bigger move down in the lean hogs is to reflect of the movement of the Dec 14/ Feb 15 spread which over the last several months has shown upward motion until July.

If we look at the overall Lean Hogs Futures charts, we can see also a projection to lower levels:

I believe we are heading toward 86 level basis the Dec Lean Hogs (currently at 94 cents).

Bottom Line: I believe we have seen the top to the cattle and hog markets so far as trend will be for weakening markets into the winter.

Please feel free to reach out to me at any time to discuss markets and your goals.