Hogs: December futures closed to their highest level since August 5 on Wednesday. Traders are still hearing about Chinese purchasing and are also excited about the three trade pacts that are now moving quickly through Congress.
Realistically, we simply do not know quantities of China purchasing. The trade pacts will not impact U.S. exports for months at a minimum. After the close, the USDA attaché to China indicated his view that China would increase pork production next year by 4% and drop beef production by 1%.
For now, speculators are urged to hold from selling into this contra-seasonal move. Hedgers have a green line to add additional protection…Rich Nelson
Cattle: The current price break in feed costs represents an outstanding time to apply feed hedges. Bull call spreads, where you only put up a limited amount of funds, may be the way to go. It will certainly help the negative margin situation many feedlots are in. We must point out most operations will not be as bad due to DDG feeding…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.