Allendale Livestock Wrap-Up for 11/18/2009
Hogs: We should see quieter action in the next few days. Ahead of Thanksgiving we will simply look for the steady to lower cash hog trend to continue (packers don’t need the hogs next week). On the futures end we must reiterate Tuesday’s higher futures run was made on an astounding 7,873 new contracts added to open interest. Without digging into our database that is likely the biggest gain in months. We had a lot of people interested in getting into hog futures as prices rose. That is bullish. It also tells us 55.00 is the support point for December futures now.
Cattle: This morning’s news that cash cattle traded steady to $2 lower in Nebraska set the tone for the day. That will reinvigorate the talk of steady to $1 lower action for the live based action later this week. While demand bulls can suggest beef demand will be returning in early 2010 the supply bears can suggest building feedlot inventories will offset those hopes. While bears are in control right now we still are not convinced the “reality” of the current situation is not as bad as advertised. Get this: wholesale beef prices are not breaking. In the past four days choice boxed beef is up $1.44 while select is down $1.25. While packers can complain about margins, this recent action of falling cash cattle and stable beef pricing is not a bad deal for correcting their situation.
In other news, this afternoon Dow Jones released its compilation of average analyst guesses for Friday’s COF report. The average trade guess is placements 105.5% and Marketings 97.8%, which makes Total Cattle on Feed at 101.6%. That is right next to Allendale’s 105.0%, 97.3%, and 102.1% numbers. These numbers are in percentage of previous year levels. In other words, the average trade guess is for Placements to be 5.5% larger than October of 2008.
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