Hogs: Tuesday, we were excited about the 436,000 head run. Wednesday’s 438,000 head mark is quite a feat. For those of you asking, we found a 439,941 in September of 2012 and a 442,502 run for Dec. 21, 2009. If it weren’t for the still-low Saturday slaughter that is currently planned, we would happily say “huge weekly kills” are here. Yes, cash hog prices have fallen in the past week and a half. Yes, slaughters will be “moderately big” this week and post a “slightly bigger” kill next week for the year’s peak.
However, we have to wonder if prices are nearing the worst of it. The lean hog index, the measure of cash hog prices that the CME uses, will be 87.03 tomorrow. That applies to cash hog trading through Tuesday. Typically, this index posts the winter bottom in the days just before Thanksgiving. December futures settled Wednesday at 87.35. If we had a crystal ball we would say another week of lower cash hog prices and slightly lower futures could be seen. After that though, prices are on the slow rebound.
December futures are not trying to guess where cash hogs will be in November or where they will bottom out during November. December futures are trying to guess how high cash hogs will be on Dec. 13. Trading December futures, off the short-term November fundamentals, is a tough issue. This whole issue, of trying to estimate December cash hog prices, is ridiculously tough given the tremendous rumors of PED. The full wrath of PED will be theoretically seen as we get into December.
Cattle: News was a little quiet on the beef end Wednesday. Packers are still saber rattling over their +$30 per head losses. They have dropped this week’s kill in an effort to prop up the wholesale beef/live cattle margin. At this point, all they are doing is stabilizing cash cattle and posting only mixed results for beef (through today’s AM meat report). They could be hard bargainers again when negotiations get more serious Thursday. While the short-term picture is still a little sloppy for cattle pricing, it is hard to get seriously bearish this market given the long-term fundamentals.