Cash hogs rally, while cattle bulls are cautious

Livestock report

Hogs: Big $2 gains were made to cash hog prices Tuesday. That made the gain $6 since one week ago. The December futures contract is continually trying to price itself higher as it has the tough job of guessing where this cash hog market will be on Dec. 14.

While this is good news, we are not sure if this is the right time to jump on the bullish bandwagon. Seasonally, there is a two-week rally in cash hog prices after Thanksgiving then lower trade through the remainder of the month.

For the short term, our next trade may be on the short side to pick off a small amount. For the long term, from now until next summer, we remain supportive…Rich Nelson
Cattle: President Barack Obama may have scared some cattle traders Wednesday with his comment that he expects a budget agreement by Christmas. This may have been a wake-up call for many in the trade that we should not expect an agreement anytime soon.

This story, like many others throughout the years, will have both bullish and bearish twists and turns. The question here, of course, is consumer confidence and demand for beef.

We have noted this week that December is typically not a bullish for month for cash cattle. After the second week, end-users are buying product for the post-holiday period. Long term, we remain big bulls for 2013 live cattle pricing. For trading, the risk on our buy cattle/sell hog spread trade was filled Wednesday. We filled ourselves assuming traders were waiting until the close. We were right on the cattle side but this hog market has posted incredible trade…Rich Nelson

About the Author

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.