Hogs: Of the three big proteins, chicken has the smallest demand problem. Boneless chicken breasts are priced 4% higher than last year. Leg quarters, supported by the export market, are priced 8% higher. Compared to pork, when evaluating production, this is not too bad.
For Wednesday's action in hog futures, the margining problems were the key driver. We do have a little bit of good news to report for hog fundamentals, though. It is likely the April 18 low of 76.53 for cash pork was finally the low for spring. While that sounds great, let’s keep in mind we are not really rallying away from there when considering the current 78.45 quote on Wednesday. Cash hogs, however, have not put in a clear bottom. Packers are running with production losses right now and may be hesitant to get aggressive with cash hog buying just yet.
It is also interesting to see May futures, which expire on May 14, priced at 81.30 compared to the latest lean hog index quote of 82.25. Futures are thinking cash hogs still have another $1 lower left! This would make the lean hog index (cash hogs) 12% lower than last year’s May 13 quote of 92.54…on only a 1% to 2% higher production. There will be an inflection point where retailers get aggressive but that time is not yet…Rich Nelson
Cattle: Three demand issues that have popped up in recent weeks are gas prices, LFTB, and last week’s BSE finding. A bigger picture item, general employment health, will be updated on Friday. Wednesday morning's ADP survey of private market employment was disappointing. Will that carry over onto the government’s big picture reading on Friday?
The bulk of cash cattle trading still has to develop. Much of the trade is looking for only steady money with last week right now. For now, our general price expectation is for cash cattle to hold for two more weeks after this. We do look for prices to move moderately lower into later May/early June…Rich Nelson