Hogs: This was a confusing day for the pork industry. Smithfield will be closing its Sioux City, Iowa plant. The company gave confirmation of that news and indicated the plant, built in 1959, was the least efficient of its current offerings. The company indicated much of the production shortfall from that plant, located along the Nebraska border, would be made up by its nearby plants in Sioux Falls, SD, Crete, NE, and Dennison, IA. This news is bearish as we have fewer shackle spaces out there bidding for hogs. We would estimate it could drop cash hog prices by $3 to $4 from where they would have been if the plant were open. The plant is slated for closure on April 20. This $3 to $4 “lower than should have been” price will be felt from now into April. The company indicated slaughter would be shifting over to other plants in the coming weeks. This will have no effect on wholesale pork production or prices. With this bad news futures broke by $1.72 at one point in both the February and April contracts. Contrasting this very poor news was word that the Iowa/Minnesota AM hog report showed negotiated prices were up $4.92 from the previous day! That positive jump in prices was due to the icy conditions seen today.
Cattle: Looks like the industry will have to wait until late morning or early afternoon tomorrow before seeing cash cattle actively trade. Bids right now are mostly $83 with a few $84s, while asking prices are generally $88. That is a wide spread. Last week’s cash averaged $85. The trade still expects cash cattle to trade steady to $1 higher as wholesale beef prices are generally higher than last week. One negative thing we must point out is beef fell $1.17 and 48 cents for choice and select respectively this afternoon. Also, as we mentioned in this morning’s comments yesterday’s futures trade was done on profit taking (lower open interest). That is the first we have seen in awhile. Our bias is still positive here but we will admit prices are nearing the higher end of our expectations now.
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