Livestock Angles: Cattle market remains uneasy

January 18, 2008 02:49 pm

— The cattle market has been an interesting study so far this year. It appears the cash is starting out in one direction, while the futures market is heading in another.
The cash sales in the first week of the new year were as high as $95 per hundredweight basis the Midwest, almost $3 higher than the previous week. The futures prices slipped nearly $2/cwt. during the same period. This disparity in the two markets indicates the cattle market is still in an uneasy and negative position as the futures market represents attitudes beyond today’s market sentiment.
Demand for beef continues to be the major hurdle for the cattle market to overcome. Each time the beef cutouts increase near or over $150/cwt. basis choice, the volume in the boxed beef trade slows considerably. Retailers are showing considerable resistance to paying higher prices for beef while poultry and pork are plentiful and much lower in price.
Packers have cut the kills in an attempt to force the cutouts higher while at the same time are relatively short bought in their kill needs. Therefore we could see further strength in the cash market, which in turn could initiate a rally in the futures market. This is likely to be only short term unless demand changes and beef can move better at higher prices. If any rallies occur, producers should use these rallies as opportunity to lock-in winter through spring inventories.
The hog market has started the new year the same as it ended the previous year: on a downward trend. The number of hogs continues to remain plentiful, allowing the packer the luxury of maintaining his profit margin and gathering live inventory on his terms. This has resulted in decreasing prices for live hogs since last summer.
The good news remains the same for the hog market: the demand for pork products. Despite the heavy slaughter, pork products have continued to move, and cutout values have remained fairly stable since October, indicating the good movement of product.
Exports have continued to provide much of the underlying demand and this should continue to expand in the months ahead. The price outlook continues to be steady to lower in the foreseeable future as hog numbers are expected to remain ample.
Considering the premiums offered by the futures market, producers should take advantage of these premiums and lock in some inventory through late spring.

Copyright © 1999-2008 cnhi, inc.