Hogs, cattle focus on factors other than winter storm

Livestock report

Cattle feedlot Cattle feedlot

Hogs: As it stands right now, Des Moines, Iowa, and Omaha, Neb., are set for 6-9 inches of snow. North-central Missouri (Marshall) is forecast for 2-5 inches with a sleet mix. This will impact Thursday's marketings in a clear way.

Unlike in cattle though, it will not affect actual weight gains. Those hogs will be in the buildings, getting bigger, and ready for next week’s market. Snow disruptions are not bullish in the long term for hogs. Futures were not too concerned about the snow today, though.

China’s threat about demanding verification for Paylean-free pork by March 1 is too big to ignore. Given the government’s potential spending cuts right now, we doubt if USDA personnel have the time to put together a proper team to actually discuss the possibilities of meeting their demands. Also, would the government approve a special program just for one country?

We had been ready to switch from a neutral/bearish short term expectation to a neutral one this week. This news could add a little more pressure now. This market wants to see wholesale pork prices show a change from the recent trend before futures will change their tune. That won’t happen until March…Rich Nelson

Cattle: Considering the fact that the nation’s No. 2 (Nebraska) and No. 3 (Kansas) cattle-feeding states are set to see their first real snow storm of the season, today’s sharply lower futures prices were a surprise. In fact, if you add in Iowa, which is a player now at No. 5, then 45% of feedlot country will see snows of more than 6 inches. The latest forecast we see is for 10-12 inches for Kansas, 6-9 inches for Nebraska and Iowa, and 3-6″ for Colorado and South Dakota. This will start Wednesday night and last through Thursday.

Instead, cattle futures were likely panicking over concerned rhetoric over USDA’s threat on meat inspection personnel problems. There was some live-based cash cattle trading Wednesday at $123. That was steady with last week. Though April and June futures did not break to new contract lows, we will point out it was the lowest close of this down trend. For now, we still remain neutral. Demand is a dirty word right now and government furloughs are a second threat.

Lastly, there is still talk over the Russia ban on U.S. beef and pork. While everyone is running for the hills right now -- and given the problems just noted they are right for now -- we are not selling. This market has yet to feel any significant drop in cattle slaughter yet. That is right around the corner. Steer and heifer kill will drop to as much as 6% under last year in the coming one to four months.

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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