Cattle & Hog Report for June 10

Hogs: At this point, cash hog prices are still in their downtrend. The lean hog index, the CME’s measurement of lean hog prices, will be $78.80 Thursday. That applies to cash hog pricing through Tuesday. Nearby futures are still holding a discount to that measurement. When cash hog prices bottom, which we look for at the end of this week, futures may become interested in posting a premium.

For more short term news, we will be interested in meat based information on the supply/demand report. For those who are not aware, USDA’s report covers a wide variety of products, not just corn, soybeans, and wheat. You can find the livestock/meats information in the back three to four pages. A direct link to the report can be found on the Government Reports section of the Allendale website. January through March chicken exports were down 15% from last year. Last month USDA lowered their expectation of 2010 chicken exports to 18% lower. With Russia now acting like US chicken will never get back in, is an 18% decline enough? For the short term we cannot call a bottom yet...Rich Nelson

Cattle: With wholesale beef prices continuing to fall, it reiterates the idea this market is still in a downtrend. We did see cash cattle bids move up to $92 but no action was seen from those earlier $93 trades. It still feels as though $90 for summer is our target price. One development which we are interested in was the lightening of the “outside market” pressure. Though the stock market did close lower on Wednesday, the US dollar and crude changed direction. If that continues, we would see the pressure on cattle futures lessened a little. Either way, we are still looking for August to trade an $88 to $91 range into summer. For Thursday, we are not looking for USDA to make many changes in its beef export forecast for 2010. First quarter exports were up 25% and USDA sees the total year number at a 10% increase...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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