Hogs: Depending on which forecaster you look at, we have roughly two more days of temps hitting up to the low 90s. The trade is going to watch these weekly weight reports a little more closely now as they look for signs of producers shipping off hogs at lower weights.
Keep in mind that pork production is not just slaughter numbers. Pork Production = Slaughter Numbers x Carcass Weight. We could take another 0.5% to 1.0% off weekly pork production levels just from this weight issue.
While the market is not rallying hard on this news, it is helping to offset some of the demand problem here. With that in mind we will be watching Thursday's monthly cold storage report closely. The USDA will give us a count of both pork and chicken stocks. Stocks of lower-end chicken have simply ballooned.
Cattle: Two days of higher wholesale beef prices sound like a good thing, but we cannot get excited about it. Instead, we believe this is just in reaction to the two previous weeks of strong cash cattle prices. During that time period beef prices were actually falling.
Traders are also not going to get much to trade from on the cash cattle side until Thursday afternoon or Friday. Packers are posting bids at $92 against asking prices of $96. Feedlots may be waiting for Friday’s Cattle on Feed report before stepping up to the table. They are hoping that marketings during June are strong. That would imply smaller market ready numbers right now.
A second issue that could counteract that good news are the placement numbers. The average guess for Friday’s report is for placements in June to be up 20.5% from last year. That makes two months in a row of dramatic placement increases. Those cattle would finish out from late October to February and would therefore be bearish the December.
Also, on Friday is the bi-annual Cattle report. It is unofficially the Cattle Inventory report. In it, the trade is looking for 1.2% smaller overall herd numbers. Keep in mind, because cattle are inefficient reproducers compared with hogs and chicken, we have a breeding herd that overshadows the numbers that are currently in feedlots. Another good thing about this inventory report is it will indicate cow/calf producers are still contracting their herds. This will make for lower beef production numbers through 2013 at least…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.