Hogs: While cattle futures are still moving higher, the lean hog trade is wondering if the party is over.
Premium to Cash: For some time, summer futures, May through August, have been trading at premiums to cash hog prices. That is perfectly normal as hog prices typically peak in the summer. As cash hogs have climbed, May futures has narrowed that premium to a $2.34 premium. In essence, May futures are saying there is a $2.34 rally left in cash hog prices into May 14. That sounds reasonable.
Cattle: Just like four weeks ago, we are hearing of more “talk in the country” about packers scrambling for cattle. One long time client of ours told us one distanced packer that had never bought from him was happy to buy this week’s numbers, which are still two weeks from a proper finish, at $100.
Beef Prices: Though cash cattle have been moving lightly lower in the past four weeks, beef prices have continued to rally. Through today’s midday meat report, choice beef is only $2.44 away from retesting the 2008 highs. Heck, today’s quote for select is actually $.63 over its equivalent 2008 high! Cash cattle peaked in 2008 during that time with trade at $101 and $102. If you plug today’s wholesale beef price plus our assumed by-product price into our cash cattle model, it implies $102 cash cattle. Guess where cash will trade next week…$102…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.