Hogs: The market did a good job today in making some solid bears question their position. In this past week we have been noting this market has probably done more than it needed to on the downside and could be ready for short term rebound. No one will argue pretty much all fundamentals are still bearish. In the short term we have backed up hogs. Next week’s kill will likely be just as big as this week. The hogs that are going through right now weigh more. The summer has been great for weight gains. Combined with being on feed too long, the extra weight gives us is 2.6% more pork each week now. Yesterday’s wholesale pork report fell $2.07.Medium term fundamentals are bearish. The media is hyped up on swine flu. The US government believes we need H1N1 vaccinations for half the country. The media will continue to increase its hysteria at least through the beginning of flu season (October). Having said those bearish factors we do believe there is nothing wrong with the market making a short term rebound. The October chart shows a gap, even on the Globex, left open from $47.12 to $47.20. That could be a target for chart based traders. Also, we noted on Tuesday that Monday’s volume had died down to 16,570 contracts. The enthusiasm for relentless selling has died down.
Cattle: As of this writing we have not heard of any cash cattle trading yet this week. Packers were bidding $128 and $129 on a dressed basis. Last week’s trade was $130. Feedlots are still holding out for $1 higher. While Nebraska may trade a few dressed cattle tomorrow we would look for the live based Kansas through Texas areas to hold off until Friday’s 2pm Cattle on Feed report. You can see Allendale’s and remaining trade’s estimates on the AM Livestock Fundamentals page of this report. One other thing we watching is the wholesale beef market. In recent days it was posted light gains. This afternoon it closed down 79 cents for choice and 68 cents for select. We may see cash cattle trade on steady when it’s all said and done…Rich Nelson
Rich Nelson is Director of Research 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