Hogs bearish on rising supply; cattle herds thinning

Allendale Meatz Wrap-up

Hogs: Meat markets generally follow a predictable flow in pricing throughout the year. Seasonal increases or decreases in supply and demand are the key issue. Generally an analyst’s main task is determining whether the seasonal price changes will be more or less than usual. While some are suggesting this year’s cash hogs and wholesale pork need to make that August rally that was done last year, we cannot join that bandwagon. If you look at the chart, we already made the equivalent of that August rally (in June). While we posted a small rebound into late October last year, it would appear that small rebound this year will end this month. We hold a negative bias on this market because of expectations of rising supply…Rich Nelson

Cattle: Cash cattle traded at $118 last week. Based on falling supplies of market ready cattle numbers in recent weeks we have seen wholesale beef post on respectable gains. The trade expects cash cattle to trade possibly up to $120 this week. Using a normal basis at the end of August of $1.52, you could easily argue August futures should be priced at $121.50 or so. We cannot argue with today’s $121.67 close on the August. Stay supportive here…Rich Nelson

About the Author
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.

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