Hogs: Futures have been in a sideways range for three weeks now. There are some good hopes for 2011 still in everyone’s minds. In the short term, though, we have oversupply and weakened exports. Next week’s Cold Storage report may be neutral to bearish as it recognizes these problems. Also, in the second half of December, cash hog prices typically break as packing plants take some holidays off.
Another issue here is cash prices. Now that December futures are done trading, February takes the reins. Traders new to livestock will see the premium to current cash and wonder why that is there. Thursday's lean hog index, which is good for cash hog trading through Tuesday, will be 68.93. This comes to our expected 68.95 price.
Cattle: For those new to following livestock, the U.S. beef industry is a feedlot-style system. We send young males (steers) and some young females (heifers) to feedlots for high gain and high fat growth. 80% of the beef produced in the United States is this high-quality product. The remaining 20% comes from cow and bull slaughter and is used to help make lower quality product for items such as ground beef and canned soups. Friday’s Cattle on Feed report details how many young animals started their visit to the feedlot (Placements) and how many finished their visit (Marketings). Depending on their entry weight, season of entry, and other factors, they may stay in the feedlot for three to eight months.
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.
