Cattle & Hog Report for May 13

Hogs: We now have three days of higher cash pork prices. This may help some of the trade’s concern over cash hog pricing. Though yesterday’s final Iowa/Minnesota cash hog report showed a big increase in pricing over the previous day, it did set back today. Overall, packers are cutting kills in order to help their variable margin (pork vs. cash hog). Prices typically take a two week decline at this time of year so any mixed trade seen is actually a supportive thing. While trade psychology has turned negative in the short term the large drop in supply into summer keeps us longer term supportive...Rich Nelson

Cattle: Cash cattle have hit a theoretical wall. Active cash trade today at $100 in Oklahoma and Texas has now cleaned out the majority of showlists. This is a disappointment as the rise in beef prices since the last cash cattle trading would imply a $102 could be seen. We will point out that Nebraska was able to move numbers at $162 and $163 today. That was better than last week’s $160 and $161. The problem here is the argument for still being bullish is waning as time goes on. Beef production has increased in each of the past five weeks, will be higher this week, and then will post a good sized peak next week. The demand side is a bigger problem for bulls. Meat buyers are finishing up buying for Memorial Day features. While we certainly agree the supply situation for beef is at historic lows (once considering US production, imports, exports, and population growth) it can not overcome the basic seasonal factors that make cattle prices low in the summer. Summer futures are implying cash will be $96/97. We still feel it is hard to justify cash falling only down to $96/97 from its $101.50 high a few weeks ago. Typically the drop is 10%...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.

About the Author

Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. Jim McCormick is Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA.

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