Lean Hogs (CME:HEV14)
Lean Hog Fundamental Support: This week’s run will “almost” be a full weekday kill week. We have a full Monday run, one plant down on Wednesday, and only one closed for Friday. Though the Saturday shift won’t post all the way back up to winter levels yet, it has come off the summer stretch of only 1,000 to 4,000 head. Numbers are building. Along with better supplies and lower demand you would expect prices to fall. They certainly have fallen and everything we see shows that will continue.
But these discussions are about cash hogs and cash pork. What about futures? They are trying to price cash hogs on October and December 14 respectively. Though last week’s futures trade rejected both higher and lower trade, there is some wondering here if enough is enough. October futures already have quite a discount piled on.
Live Cattle (CME:LEV14)
Live Cattle Fundamental Support: One thing discussed at this afternoon’s weekly meeting with the brokers (view the recording) was the fact that though some of the smaller issues have changed to a bearish bent, the general situation has not changed. The Russian ban on US agriculture products is bearish for pork and chicken which is therefore slightly bearish to beef. We also have seen cattle weights tick up. Steer weights (carcass) are now 8 lbs over last year at this time. It was just at the end of May they were 6 lbs under last year.
But the general situation for supplies really has not changed much. In the past four weeks, kills have run from 572,000 head to 577,000. That is not a massive increase. The main point with this discussion is that yes, we should be priced off the peak levels that were seen last month (demand and competing meats). But they really should not fall that dramatically. We were concerned at the end of last week that the South had not moved its market ready numbers. That would imply a net increase in showlists, market ready cattle, in today’s showlist estimate. The final number for the whole Plains was a 1,000 head decrease. That may cause some to wonder if this discount in futures is too much. Don’t forget that Friday afternoon’s futures prices were implying cash cattle should drop $3 for both this week and again for next.