Hogs: Moderately lower close in most months with the Feb. taking heat on ideas that the crash in the ham market (down 3-6 yesterday and down another 2-4 midday) combined with continued higher prices in the cash hog market (I/M up $1.44 to $60.52) will spread even more red ink on the packer margins and force them to trim kills next week. And force cash hogs lower. Some of the pressure also from the retail sales/stock market as it was in the cattle pit. Technically, almost looked like a 'key reversal' was coming in the April after new contract lows and prices came screaming back later session, but failed to close higher on the day. So, we will give it a 'reversal of sorts' and see if it means anything bullish. Part of that support may have come from the February contract: early break held the "Christmas lows", four days at 59.20-58.90 and that likely steadied the back months. The broad chart pattern is still negative.
Cattle: Moderately lower close in a thin trade that saw most of the pressure from the falling stock markets early on a terrible December retail sales report. Once more perhaps the market is reminded that this is still a case of a supply-bull meeting a demand-bear. Cash cattle trades reported early in the northern plains (Iowa likely) at $138.00 then dropped to $136.00 and from a regional packer. While higher than last week, reportedly other major packers were still bidding well below that. Sx. Falls terminal closed down $1-2.00 at $81.25-82.70. Beef prices strongly higher again at midday, both in choice and select, which provided some underlying support on ideas that that may aid higher cash cattle prices. We still have a problem with the beef movement which has been only what we would call "decent, but light-side" (considering the price hikes) and there is little to indicate any boost to the tepid weekly beef export sales. Hence, we expect cash cattle rallies to be tough to sustain and once the retailers get their post holiday pipelines refilled, these higher beef prices could cut back what demand we have. As an aside, beef prices are the highest since Dec. 2 and back then cash cattle prices were $85 to $87.00; last week prices were $84.00 (bulk). Will history repeat itself? Stay tuned. Technically, some interesting notes: Feb. early took out Monday's low (as did April) and hit apparent sell-stops; soon after a short covering rally took prices back over steady money then fell 100 pts. off it high later session. Not a confidence builder for the bulls yet. Once again we have to ask: is it a bottom or a bounce? Bounce still the best we see for right now.
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.
