Hogs: While much of the trade focuses on short-term effects from summer heat, we have received question from clients on the long-term effect. Won’t excessive July heat hurt breeding herd performance? Should we be buying summer 2012 futures?
There is clear university and industry literature discussing how excessive summer heat affects farrowing rates and pigs per litter numbers. These effects can last for four to six weeks after the heat period subsides. As excessive heat started on July 11 in the Midwest, we should see low production for hogs born in November and finished in May 2012. It sounds good but the data do not back it.
On a nationwide basis, high summer heat does not have a clear impact in pigs per litter. Only in 1983, the worst of the worst heat years, was there a clear problem.
Cattle: It is common for cash cattle to make two attempts at a summer low. If we are right in believing this late summer price dip is over, then wholesale beef should show some strength soon. Last week’s cash was $108 and $108.50. Packers are already bidding $108. This implies some $109.50 trading could be seen by the end of the week…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.