Weekly cattle & hog report for Nov. 26

Allendale Livestock Wrap-Up for 11/25/2009

Hogs: Tuesday was important for us. After looking at the recent better than expected export information, and seeing signs that it was not a fluke, we turned supportive to hog prices. We are officially past the negative effects of H1N1 and the market is now pricing hogs back according to normal changes in supply and demand. This week the Iowa/Minnesota run of cash hogs has seen over a $6 gain. The pork cutout will likely end around $2 higher. It is also interesting to note, cash hogs and cash pork typically have a minor rally in the Thanksgiving week and the week after. The table below shows futures usually post decent gains the day after Thanksgiving.

Thanksgiving Day Effect: Change from the day before to the day after Thanksgiving.

February Lean Hogs $/cwt

15 Year Average +.40

Up Years 13/15 +.52

Down Years 2/15 -.35

Pricing: This market is in an uptrend and as long as exports remain at a good clip (equal to or higher than last year) we may hold this premium to last year prices over the winter.

Cattle: We have to say this morning’s jobless claims report was a bit better than expected. The trade had expected the government to drop weekly claims from 505,000 to 500,000. Instead they posted a sharp decline to 466,000. This is the lowest number since September of last year. Also supportive was the new home sales report. It indicated a 6.2% gain. In the big picture, while unemployment is still growing, it is no longer growing quickly. We can also point to the fact wholesale beef has posted moderate gains every day of this week. We are not seeing a second wave of “lower beef demand”. Instead, beef demand has stabilized. This week we also saw cash cattle trade mostly steady at $83/$84. December futures, at today’s close, are implying $83 at the end of December when a normal basis is implied. In other words, we are saying the worst is over. We still do not see a need for this market to retest the summer lows in cash cattle of $80/$81. For the near-term we will look for this market to post a sloppy trade. We think the next move will be higher. When that happens depends entirely on when the market feels unemployment has hit its worst.

Thanksgiving Day Effect: Change from the day before to the day after Thanksgiving.

February Live Cattle $/cwt

15 Year Average +.08

Up Years 8/15 +.32

Down Years 7/15 -.19

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

About the Author
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.

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