Published: January 30, 2008 03:16 pm            

Livestock Angles: Weak cattle cash prices

Originally published in the January 25, 2008, print edition.

The cattle market continues to struggle as we get further into the new year. Cash prices remain weak as packers have turned less aggressive in accumulating live inventories.

This is a direct result of poor beef sales and cutout values that continue to slide despite the cut back in kills. This has squeezed the profit margins on the packer and therefore the reluctance to pay higher prices for cattle.

As mentioned in previous columns, the $150-per-hundredweight area on choice beef cutouts has been a resistance area for retailers and once again this is no exception.

With slaughter remaining higher than a year ago, look for cutouts to slip further in the weeks ahead, putting more pressure on live prices. There appears to be little help in the export arena as no new progress has been made with Japan and South Korea to lift the ban on imports to those two countries.

With the economic situation here in the United States showing a weakening posture, it is highly unlikely that the demand situation for beef domestically will improve but more than likely decline in the weeks ahead.

This leaves the cattle market in an extremely vulnerable situation and odds are that further price decline could be in front of us. This should alert cattle producers to approach the next several weeks with caution and use all avenues to protect inventories.

The hog market has shown a brief respite in a long decline in prices during the past week. It would appear the main cause of this small advancement in prices is due to the weather.

Cold temperatures have slowed the marketing of hogs, particularly in the Upper Midwest, which has elevated the cutout values in the short term as demand for pork products has remained good. This weather-induced rally could continue until warmer temperatures are forecast.

The overall picture for the hog market will change little until the numbers of hogs being slaughtered are reduced, relaxing the amount of pork product available. This does not seem to be in the near future, as the increase in grain prices appears to be bringing on some herd liquidation, which is keeping the slaughter rate high.

Demand has been the catalyst that has kept the hog market from total collapse, and it remains strong due mainly to the ever-increasing exports. With the competitive situation, pork along with poultry remain the forerunners in demand which could hold prices in the months ahead.

Producers should be aware of the premiums offered by the futures and use rallies to lock-in inventories.

        

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