Factors push hogs higher, while cattle waits on supplies

Livestock Report

Hogs: The Lean Hog futures were like a “deer in the headlights” Wednesday. Weather in the Midwest is making it difficult to move hogs to packing plants while snowfall on the East Coast is also hampering movement of product. The hog industry has been plagued by backups from late December. Producers and packers just haven’t had a chance to get current. Hogs have continued to gain rapidly as carcass weights are running 8 to 9 pounds heavier than a year ago. Watching beef prices work higher, one would expect pork would see some of the benefit at the retail counter. Hog supplies should tighten as PED problem supplies show up at the packer’s gates. We find it difficult to be a seller of hog futures at this time.

Cattle: The discount of the February contract has driven shorts out of the market when it was reported cash cattle traded at 147 in the South. We also heard talk of 239 dressed in NE. The strength in product is providing the packer with profit margins they haven’t seen in years. We keep reminding our clients this is a supply driven market and will continue to be strong until price limits demand. The placement numbers from last fall are suggesting we will see larger supplies coming available in a few weeks. However, the extreme cold temps are slowing rate of gain when supplies are already tight. Traders are watching beef product values to give us an indication the consumers have had enough of high prices. The question of the discount of February futures to cash has many clients saying they are under-priced. Please be reminded that February futures are based on what the trade thinks cash cattle will be on Feb. 28. Look for option strategies to protect the downside…Paul Georgy

About the Author

Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. Jim McCormick is Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com

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