Hogs: With two months of the year wrapped up we see slaughter levels so far are running 0.5% higher than last year. This is pretty close to our Q1 estimate of a 1.1% increase. Expect weekly kill levels about the same as February next month. It won’t be until mid-April that this market gets the “tight summer supply” fever and cash hog prices really get going. We are neutral to April futures but look for several opportunities of +$100 summer futures…Rich Nelson
Cattle: The February live cattle contract expired Wednesday. That now puts the April contract up to bat for determining cash cattle prices in March and April. Keep in mind April futures are only trying to determine cash cattle prices in the later part of April. June futures are trying to guess prices in later June. Cash cattle typically peaks between mid-March and early April then declines through summer. That makes it very important to look at normal basis levels for each week to gauge where futures think cash will go. April futures, at Wednesday's $129.75 close, are already pricing in a cash cattle rally to $130. Making this clear, cash cattle can rally $2 more dollars between now and the first week of April and April futures do not have to rally one cent. It is already priced in. If April or June futures do happen to rally in the next two or three weeks, as cash posts a last hurrah, consider it a gift. In the next four weeks we will start to play this market from the aspect of a seasonal peak. That means light hedges for producers and buying Oct/selling June or buying Dec/selling June for speculators…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.