Hogs: Mostly lower close though pigs not hit as hard as the cattle: Feb. off 40 to $63.55 and the rest mixed. Most of the losses were tied to spillover pressure from a general commodity meltdown across the Agricultural base initiated from sharply lower crude oil. Some support remains from talk the cash hog market has bottomed and move higher into Feb.; part of that seemed predicated on the recovery in hams post-holiday that went to prices in the low 30-cent area before recovering. But will the recessionary economy support much higher prices? The jury may be out on that though if exports were to pick up, the lighter live supplies would stay supported to a degree. Technically, there are signals of a bottom but a bottom or a bounce? For now, maintaining prices over the major moving averages is a positive; if long, a close under $62.35 may be a near-term bull defense area. May not need it for now dept.: hogs hate a gap? Feb. has a large one to $60.95. Interior hogs mixed averaging roughly $52.50; packer cut outs raised $2.54 (as an aside, that cut out magic seemed very much Enron-like to me on how it was put together. Smoke and mirrors comes to mind).
Cattle: Sharply lower close with Feb. down $2.77 to $85.77 and the rest sharply lower as well. A combination of the implosion in the U.S. stock market; crude oil; metals; grains, etc. One big reason behind the drop was, or should be, of particular interest to the beef market: December unemployment record large. Last time out we wrote that cattle seemed a case of a supply bull meeting a demand bear and if so, a demand bear usually wins. While the sanity of that argument was tested yesterday, today’s retraction offered some mental health that if steaks are not selling at $6-or-7.00/lb., think they will sell better at $10.00 in a recession? Packer’s have one major option to keep losses at a minimum and I believe that is cutting kills, backing up showlists and managing live and beef inventories to as minimal a loss as possible. Even if the weekly beef export sales picked up enough to support higher cash, which would still translate into even higher domestic prices. Yea, there’s the rub. Optimistically for me, cash cattle will have a tug of war between the $90.00 and the $80.00. For now, we still lean to the lower $80.00’s based on a continued domestic and global recession. Cash cattle not established; beef mixed midday. Technically, the Feb. crashed under it major moving averages. Its 10-day m/a and its near-term trendline support; a close under $84.95 the likely near term bull defense area…John Kleist
John Kleist is an Ag Specialist at Allendale, Inc. in McHenry, IL. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com.
