Hogs: Regarding 2013 pork production, the USDA suggests Q4 production will be +1.6% and Q1 will be -1.3%. The Q2 estimate, reflecting high grain prices this summer, could show a -1.1% year-over-year change. We think they may be a little high for the Q2 estimate, but their general numbers compared with last year are in the right direction.
Expect adequate supplies through the end of the year and then for 2013 to show clear declines and higher prices. We are still discussing $105 for minimum upside targets for summer 2013 futures. That will not be seen on your quote screen until next spring. For the short term, we are still waiting patiently for this market to finish its little September to October bounce.
Cattle: The USDA is clearly stating its view that beef production is now on a downhill slide. On a comparison with last year, the agency suggests Q4 -3.5%, Q1 -1.5%, and Q2 -2.2%. We think the Q1 and Q2 numbers may be a little high but cannot disagree with the general thoughts.
For the short term, the market is trying to figure out if the weakness in September is a done deal or not. Cash bids Wednesday are $122 while asking prices are $126/$127. Both sides -- packers and feedlots -- are concerned about current and future margins. For bigger picture pricing, our supply/demand models call for minimum upside targets of $128 on the December and $138 on the April.