Hogs: Though hogs have made new highs regularly in the past week or two, they are being made on smaller days. The times of “easy new highs” are behind us. Hog slaughter will remain tight through next week. That could mean cash hogs and futures hold high levels. However, higher production numbers show up in July. Is this the time to sell? Another warning flag could come from Friday’s cold storage report. We know May pork production was bigger than anyone expected. Do we have a bigger pork supply left over than expected?…Rich Nelson
Cattle: Last night we discussed the bearish-looking placements (ALDL +13.8%) that the trade expects to be shown on Friday’s Cattle on Feed report. We noted that this number is not actually as scary as it will appear. May 2012 had an extra weekday and the comparison against last year is skewed because last year was a small number by itself. The reason for the higher May placements was due to the dryness in much of the Plains last month. Drying pastures simply cannot carry the same number of feeders.
Wednesday morning the government’s weather agency, NOAA, will release an update on its long-term weather forecast. That forecast could tell us if this placement issue is only a one- or two-month problem or if it will last all summer.
In other news it appears the beef industry is agreeing on lower prices for cash cattle this week. Bids of $115 and asking prices of $120 would appear imply $117/$118 action. That would be down from last week’s $118/$119. Allendale agrees with the June contract’s implication that cash will fall to $116 by the end of next week. We should be trying to find a bottom for the year for cash cattle in the next two to three weeks…Rich Nelson