Hogs: In a way, you could say Wednesday's November pork trade data was positive. Though November exports were 3% under last year, the previous months saw a 12% and 9% decline vs. last year. November exports were an improvement. Imports ran 14% over last year in November. That was actually not as bad as the 16% and 27% increase posted in the two previous months. November imports were an improvement. For those asking, November pork production was 2% under last year.
Another piece of news is the announcement from Smithfield. They recommended all producers supplying them hogs to convert to group housing rather than individual gestation crates. It is now offering a sliding scale of incentives to producers. At this time, they have converted 54% of company-owned farmers already. As you know, in 2007 they announced all company farms would be converted by 2017. While our client base is firmly rooted in the production side of agriculture, and rightly feels there are both positives and negatives on this issue, we can’t argue with this too much.
From a supply standpoint almost every university comparison has come up with a wash on efficiency. From a demand standpoint, this is a no-brainer. Whether crates are valid or not, our consumers don’t want them. Though the pork industry has made an effort to be more consumer friendly on the internet we are not winning this argument. For short term fundamentals this market is still saturated with supply. Until we see these numbers drop off, likely later part of next week, we cannot say bulls have much traction yet…Rich Nelson
Cattle: The new release of November beef trade data continues the positive pattern from recent months. Exports in November, of 216 million lbs., were 8% over last year. This fits in with the two previous months of +9% and +5% vs. last year. Import data was also supportive, compared with recent months. Due to the low levels of U.S. cow slaughter, we have been importing more meat than last year. That is not a surprise. The November numbers, of 166 million lbs., were 12% over last year. In the two previous months they were +30% and +10%, respectively. This information is very supportive.
Exports continue to beat imports on both a quantity and certainly a value basis. Net increases in exports, when November beef production was 7% under last year, is incredibly good news. For the big picture we have a sharp drop in beef production coming for February/March, a strong export sector, and so far stable U.S. consumer demand.
For Wednesday's short-term news, we were happy to see wholesale beef posted strong gains of $2.49 and $2.98 for choice and select respectively. One thing that sticks out about the day's trade was the fact that February futures tread water while all other deferred contracts gained. February should actually be the leader of all. It is interesting to see February futures implying that cash cattle will not rally the remainder of this month or through all of February, even though slaughter levels will fall. Speaking clearly, this market is being dragged up unwillingly. We are not in any way changing our market viewpoint, simply pointing out something dealing with today’s trade specifically.