Hogs: The change in the supply picture going into next week continues to support prices. We, and most of the trade, believe cash hogs put in an early fall/winter low. Though there is a good sized premium to current cash hogs (63.50) and December futures, which expire on Dec. 14, we do not think it is out of hand. Typically we get a little push in prices in the first half of the month.
Another issue that has been sporadically covered in recent weeks is the African Swine Fever outbreak in Russia. Some news reports suggest up to 6% of the herd has been affected. We are hesitant to make decisions based on animal health issues. If the outbreak is as bad as some suggest we could have a good customer for U.S. pork in 2011.
Cattle: New contract highs were posted Wednesday. New consumer income and spending figures, discussed in the morning commentary, confirm our expectations that the U.S. consumer will slowly return to beef. In normal years this small increase would not have much of a price impact. Because beef supplies that reach the U.S. consumer are so low, changes in demand have a larger than normal impact.
Wholesale beef is advancing and cash cattle traded $3 to $4 higher this week. Though slaughters will remain over last year through early 2011 summer there will be a clear deficit in the second half of the year. For the short term we are monitoring early December bookings for New Year procurement closely. Though futures have already met our bullish price expectations we will clearly advise against hedge or speculative sales on fat cattle...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.