April has started out with a positive push in livestock prices.
Tightening supplies in both cattle and hogs has brought on speculation that livestock prices will continue to move higher through the remainder of the year.
The hedge and commodity funds have been extremely active in buying futures contracts in both helping propel these markets to new yearly highs.
These advances in prices have dampened the demand for both beef and pork in recent weeks and will threaten a continuation of these strong upward moves.
The cattle market has advanced to over $100 per hundredweight live and $160/cwt. dressed basis the Midwest, as packers scramble to acquire inventory during the first week of April.
The aggressiveness was aided by the advance in futures which allowed the packers to protect their inventories while acquiring that inventory. The problem is that the sharp advance in live prices has forced the packer to try to keep cutout prices high to maintain a solid profit margin. However, the sharp advances in the beef cutouts have diminished demand at the same time.
With the U.S. Department of Agriculture approving the import of Brazilian beef this past week, supplies will eventually be more than adequate to fight this shrinking demand. As we move into the later part of the spring, the supplies of cattle are expected to increase and the natural seasonal pattern should take hold. This should bring about a decline in prices in the summer months.
Producers should not ignore the fact that opportunities to lock-in profits are becoming available with these recent advances in prices, and should take advantage of the current strength.
The hog market is experiencing a situation similar to the cattle. Since the USDA Hogs and Pigs Report, the hog market has shown consistent gains in price, reflecting the shrinking herd size. This has brought back prices for live hogs not seen since 2008.
At the same time, pork cutouts have advanced to new 2010 highs and levels not seen since the summer of 2008. Like the cattle, the reduced supplies of animals has prompted a supply-oriented rally in the hogs.
The problem will arise, like the cattle, that demand is shrinking with the higher pork cutouts. It is not likely that we will see a significant change in the overall inventory of hogs in the next few months. So the battle will be between the consumer and his pocketbook and the dwindling supply of pork.
Since the demand is more flexible that the supply, one would have to deduce that eventually the high prices will take care of the high prices. This should alert producers to think in a larger scale and use extreme rallies in hog prices to lock-in inventories.
Unless we see significant changes in the economic situation in the near future, the likelihood of a spring high for both cattle and hogs is close at hand.
<center>•••</center><i>Joe Teale is a commodity broker for Great Plains Commodity in Afton, Minn.</i>
Livestock Angles
Related Photos
-
Joe Teale Joe Teale
Discussion
Livestock Angles: April starts with positive push
Originally published in the April 16, 2010, print edition.
- Livestock Angles
-
-
Livestock Angles: Cattle market two-sided
June did not start particularly well for the cattle and hog markets. Both have had a more or less defensive start, with the futures market leading the lower charge.
-
Livestock Angles: May have seen seasonal highs
The past couple of weeks proved to be interesting in the livestock markets. The old adage of what goes up must come down certainly was at work during that time period. As the summer months approach, it would definitely feel as if the livestock markets have put in some sort of seasonal high in May.
-
Livestock Angles: Markets retreat on global fears
Both cattle and hogs were in a strong uptrend
when suddenly changes in the world economic picture turned more
clouded, the livestock prices retreated amongst fears that world
demand would weaken for beef and pork. -
Livestock Angles: Tighter numbers for cattle, hogs
So far April has been a good month for livestock prices because of tighter numbers of both cattle and hogs. According to the U.S. Department of Agriculture, based on recently released data, cattle and hog numbers are not expected to increase for the next several months.
-
Livestock Angles: April starts with positive push
Tightening supplies in both cattle and hogs has brought on speculation that livestock prices will continue to move higher through the remainder of the year.
-
Livestock Angles: A tale of two half-months
The second half of March was quite different than the first half in the livestock markets. The first half saw increasing prices for both cattle and hogs, only to be on the decrease in the last half of the month.
-
Livestock Angles: Cattle roar, hogs baa
March has come in like a lion for the cattle market and more like a lamb for the hog market.
-
Livestock Angles: Weather driving meat markets
The frequent snow storms throughout the country have disrupted both the marketing of live inventories and the retail sales of beef and pork product.
-
Livestock Angles: Cattle, hogs under pressure
The past couple of weeks in the livestock markets have seen prices for both cattle and hogs come under pressure, both futures and cash. This despite some inclement weather throughout the entire Midwest which usually is short-term friendly to markets.
-
Livestock Angles: Cattle and hogs have been rallying
Both hogs and cattle have seen a resurgence of bullish sentiment as well as good technical buying in the future market. Are we seeing a trend start here or are we nearing the end of a post-holiday rally. With the economy still struggling it will likely cause the livestock markets to struggle also.
- More Livestock Angles Headlines
-
