Hogs: After setting contract lows yesterday, hog futures closed higher in what appears to have been a correction/consolidation move. In the pork trade, most cuts not established with trimmings off 1-2.50. I/M wts. dropped 0.6 lbs. to 269 lbs. but are up 0.4 lbs on the year. Weather may have been a factor in a few cases but mostly in the south and east while the Iowa Pork Congress is also now in session, but neither was a major factor. The market remains trapped between lessened hog numbers and lessening pork demand as well as suffering index fund liquidation (may have been the reason June hogs were off 1,014 in the open interest yesterday again).
However, index funds do not eat pork and the cash markets have fallen strongly since last Friday which is a fundamental factor. Are they leading the decline in prices or merely following them? It is a global/domestic recession after all and that makes figuring demand tricky. Technically, an inside day as the market tries to get some legs under it and as apparent short covering moved in. February was supported by its discount to the early interior markets and the lean-index average.
Cattle: There was a steady/mixed futures close with a weak undertone overall. Cash cattle this week was active in Nebraska as prices slipped from the $131 to $130 range yesterday to as low as $129 today. However, I did hear that packers may cut back kills next week and that may have spooked the producers to sell now at the lower price levels. While it sounds counterintuitive, considering the fairly large packer profits, the trouble may be that beef inventories are too large and keep mounting due to the demand-bear aspects of the current market. Nonetheless, I will be alert to see if the threat is carried out or whether it is merely a marketing ploy. Packers can be cagey. Midday beef prices weak again on light movement.
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
