Hogs: A little better tone was seen for cash hogs. It appears the big price decline, led by losses in cash pork, is now over. While it is easy to say pork demand has been hit in recent weeks, it is harder to say how much of that is export related and how much can be identified as U.S. based. Tuesday's trade data release indicated December pork exports ended on a down note.
As it stands right now, cash pork prices have fallen to new lows for this year. It is getting about time for us to shift from our neutral/slightly bearish outlook to more of a neutral one. We cannot envision turning positive here for another couple of weeks. Right now the entire meat complex is in a liquidation mode. We will not stand in front of this one-sided mindset yet. Instead of being fearful of this market we must look at this from an objective standpoint. Summer futures have stepped back quite a bit and are now into undervalued territory when the time is right…Rich Nelson
Cattle: So far this week, choice beef is up 1.45 and select is down 56 cents. The trade is not yet ready to suggest this means stability has finally shown up in this market. Futures spent the day moving back into Tuesday's trading range. Feeder futures hit limit down at one point. As it stands right now February futures are implying cash will be $125 at the end of February. April futures, with a normal basis implied, would make for a spring high of $130 in the first week of April. This market is pricing in no improvement in demand and for only a normal decrease in feedlot supplies.
Our discussion of the coming supply decline still makes us wary of being bearish at these price levels. Keep in mind this week’s showlist of available cattle was 19,000 head smaller than last week. Feedlots saw packers bid $123 and said no way. At these prices, it is likely they will get a little more resistant against panic sales. Keep in mind as we move into March we will be marketing cattle from that low placement period from last summer/fall. We advise to stay neutral with trade positions until the dust settles….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. www.allendale-inc.com.