Hogs: In the past few weeks we have discussed the sharp losses in demand since early March in both pork and beef. Based on lower prices for the May-December 2012 hog futures we must now point out the slight loss producers may end the year with if no rebound is seen.
Based on our expectation that this hog and pork market is undervalued, and that September and December corn futures are overvalued, margins should post a moderate gain when it is all said and done.
For short-term fundamentals, we do have some good news. The lean hog index, the measure of nationwide cash hog prices, has been pretty stable for three weeks now. This is a great sign and is often seen before we start the seasonal rally into summer. One thing that is outrageous to us is the lack of premium in summer futures. The lean hog index is now at 82.69. June futures, THE summer contract, are only priced at 87.52. There is a less than a $5 premium plugged in for the hog rally?…Rich Nelson
Cattle: As we discussed Tuesday, key foreign buyers fell in line with declarations there would not be any new bans on U.S. product. Sure, export sales may dip for a period of time but we do not look for a lasting export market problem. The issue is, and has been for some time, the U.S. consumer.
On a good note, it must be pointed out the past 10 days of wholesale beef trading have seen good prices. Choice is up 13.79 while select has gained 10.58. This is great news. The last time we had these beef prices was with a cash cattle trade at $126. Something is going to have to give here. Either cash cattle is a little low or wholesale beef is a little high. Noting it is the time of the year for a seasonal decline into summer we cannot say cash cattle needs to rally, not yet at least. Cattle feeders are advised to hold those June hedges that were placed at 127.37…Rich Nelson