Hogs wait for USDA, while cattle futures rally despite cash

Livestock Report

Hogs: In the past three trading sessions, cash hogs have gained $4. This is following the normal plan of a bottom in late March/early April.

Futures saw some quieter trading Wednesday ahead of Thursday’s reports. Not only does the hog market have to price in potential changes for corn prices following the USDA report, but it has an update on long-term supplies to deal with. The quarterly Hogs and Pigs report will be released at 2 pm.

We cannot say there will be any surprises for short- and moderate-term supplies. The total hog herd will have risen from equal with last year back on Dec. 1 to now 0.8% larger than last year on March 1. In general, hog slaughter will be just a little larger than last year over the next six months.

Our real question here is with future farrowing intentions. Given the big drop in hog futures in recent weeks we wonder if producers will curtail their production plans in the future. The average guess for March-May farrowings is for a 1.3% drop. June-August farrowings are expected to run 0.7% higher than last year….Rich Nelson

Cattle: At this time, the only sales we have for cash cattle have been done at $125, steady with last week. Wholesale beef prices have continued to fall (even Wednesday again).

At this time, there is no good single reason justifying Wednesday’s futures rally. On the charts it “appears” to be a potential bottom. On the fundamental side, we can point out that showlists were estimated to be 25,000 head smaller than last week. We are guessing that, yes, futures have posted a minor bottom.

Our target we discussed for the April was $128. These tight supplies will give us higher cash cattle in the coming two to three weeks. After this, though, we just are not on the bullish bandwagon. Summer futures contracts are implying only a small discount to spring. That is not unusual at this higher priced time of year. We will use the $128 point on the April as a trigger for June and August contracts…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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