Allendale Livestock Wrap-Up for 3/17/2010
Hogs: Futures did an okay job today. News from the Russian side that they thought a poultry deal could get worked out this week was considered supportive. It also helped counteract the bearish tone posted for short term fundamentals. Wholesale pork has been falling since the 4th of this month. Cash hogs have been falling since the 10th. Hog prices are breaking now that pork production is back to where it should be. Pork production has averaged 2.5% smaller than last year which is about right where it should be. Though hog prices are holding large premiums to last year, we will note they are back to following seasonals. If that holds, cash hog prices should remain pressured into the end of the month. At around mid April, cash hogs start that normal quick run up into summer pricing levels. That rally is due to the seasonal drop in hogs available for slaughter in the summer and also from the pickup in orders for grill season. Our models imply summer futures (June, July, and August) could move to $77 on this move lower.
Cattle: New highs were put in again for the April through October contracts. Midday beef prices were reported higher for both choice and select. We also hear packers are simply scrambling for available cattle right now. With that news, we would guess they will go ahead and pay up for cash cattle again on Friday. Last week’s action was mostly $95 in the central and southern plains on a live basis and equally $146 and $147 in the northern plains. The many new subscribers that are following Allendale’s research are encouraged to view the cattle price chart found on the Special Reports page. Mid March is the seasonal peak for cash cattle prices. The current supply situation is pretty darn tight as slaughter levels are generally running a little ahead of last year at the same time that muddy feedlot conditions are taking around 2% off production levels. Also, next week is the last week of tight slaughter levels. The first of those fall placements will begin to appear in April and really start coming on in May.
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