Hogs: Before everyone starts yelling about a top in this market we would suggest a more moderate approach. While this market has stalled out we cannot say this is a sell at the market time. Cash pork fell on Monday and Tuesday but was up $1.19 this afternoon due to a strong showing from hams. You could make an argument that this is partially due to the problem at an eastern Iowa plant today. That was mentioned on this morning’s Livestock Fundamentals page. The key measure of market strength will be after that plant makes it up on Saturday. As it stands right now we would look for futures to stabilize for a few days and let cash hog prices rise up to meet the December contract. For tomorrow, look for futures to rebound on the good cash pork news received this afternoon.
Cattle: The lower turn on the midday and afternoon beef reports may start to affect the cash cattle optimism. While packers are bidding steady for cash cattle, we have not seen any sales at the time of this writing. A few late afternoon trades may occur at those prices. Up until now, feedlots have been active in holding out for higher prices. Based on today’s December futures close, and a normal basis applied, futures are implying cash cattle will be $81.55 at the end of this month. Last week’s average was $83.50. Right now for trading we simply do not want to play with near term futures. We like the idea of only buying the deferreds with the mindset unemployment will probably peak out at some point in the first quarter.
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