Hogs: Wednesday's moderately higher trade may have been a little surprising. We have some tremendous pressure coming from short-term fundamentals. This week’s kill will run something like 2.330 million head. That will be the largest of this fall kill season. In addition, the larger weights will push pork production to 1.4% over last year. In the previous four weeks, pork production ran -6.1%, -7.3%, -1.8%, and -1.2%. That should illustrate how this short-term supply situation has changed. With all of this pressure, and cash hogs and pork breaking, futures did a great job.
Cattle: Packers surpassed everyone’s expectations with strong bids and solid trade from $101 to $102.50. This $5 move over last week, on a live basis, beat feedlot hopes of $2 higher. After doing some quick research we see it was not too long ago (mid August) that packers bought $5 higher in one week. While we were surprised with Wednesday's move, we are not surprised about the direction.
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.
