Hogs: The kill so far this week has run 4% lower than last year. In eight of the nine previous weeks, numbers were more than 6% lower. Are we seeing more numbers come to town finally? Are we seeing signs of better quality corn and cooler temps helping production? Judging by the recent cash pork action, we are getting those answers right now. Wednesday afternoon, with the lower futures this week, we re-ran our profit models. Even with corn futures holding $5 and hog futures taking this break, producers are looking at profits through most of the next 11 months. That is, profits can be locked in based on current corn, soymeal and hog futures.
Cattle: Active cash cattle trade at $97 may have been disappointing this week. After two weeks of $98 action, feedlots were hoping to see resurgence back to $100 soon. One thing concerning them is that breakevens are creeping up. Back during the crazy spring rally, feeder prices rose sharply. Those purchased high-priced feeders and now with higher-priced corn are being marketed as fat cattle. Breakevens for finished cattle are rising to $100 now. Back in June, they were $90. For near-term cattle trading, we will note there are still no clear signs of the U.S. consumer getting back into beef. We have high prices primarily from the good exports and low imports this year. Wholesale beef prices have not been pulled higher as bullish traders looking at the stock market would like to believe. For now, we are only neutral to this market. Wholesale beef needs to stabilize before we jump on the U.S. consumer bandwagon story....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.