Hogs and cattle held back by substitute commodities

Livestock Report

Hogs: We all know about the seasonal increase in hog slaughter that occurs from now until winter. October and December futures have enough of that needed discount priced in. One thing we can also point out is chicken. From mid-June through July, we were seeing egg sets around 3% larger than last year. So far this month, they have been running 4.7% over last year. This is something we have to consider when looking at pork supplies.

Also, keep in mind the big drop in beef slaughter really won’t happen for a few more months. The bottom line is the U.S. consumer does have some options to choose from (for now). Chicken certainly is the sector that has the supply. This does not cause us to be outright bearish pork. As we noted the market has this already priced in.

Cattle: The comments in the pork commentary are worth considering. Some cattle feeding clients have asked us why packers just don’t seem to be chasing this market. Our general response has been that feedlot supplies will drop sharply, just not right now.

Along with this issue is also the competition from chicken. A 4.7% increase in egg sets, year over year, is something we can’t ignore. The meat counter has supplies (for now). So yes, cash cattle will continue to gain as we move away from summer. However, the big gains will not be seen until this winter.

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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