Hogs: Both cash hogs and cash pork have been in a sideways to slightly negative trend in recent weeks. We cannot argue too much with the April readjusting its expectation for hog prices on April 16 based on this information. Last week, the April was flirting with 90.50. This week, it is trying to decide whether 87.00 is low enough. While we may consider lowering our forecast expiration price down from 89.00 it will likely not be down to 87.00. We will consider sub 87.00 to be buying territory.
Cattle: In normal weeks, it would be unthinkable to see feedlots readily accept $3 and $4 lower cash cattle after they just sold them for record amounts the previous week. However, kill levels have been limited for five weeks in a row, and this is the prime reason why feedlots are taking these lower cash cattle prices so agreeably. With packer kill cutbacks from late January to late February, feedlots have a few extra head on hand.
A second issue, of moderate importance, is weight gains. Steer carcass weights are running 2.4% higher than normal right now. This comes from those delayed marketings noted earlier as well as these very warm temperatures. This warm temperature issue is expected to continue.
These two factors will act as a hangover and limit the rebound many are discussing for later this month. Hedgers are advised to play it safe and keep hedges on regardless of whether a moderate rebound is seen. Traders can work lightly from the sell side using the December/June spread.