Livestock Angles: Cattle rally slightly, hogs lose ground

March 14, 2008 03:07 am

— As we start March, cattle prices have rallied slightly back to the top end of the range they have been in for the past several months. Tighter numbers have helped produce this firmness, along with increasing boxed beef cutouts. With this increase in beef cutouts, however, the volume in the boxed beef has dropped off once again as the prices increased.
The $150 per hundredweight area basis choice beef continues to be a major roadblock to sustaining any further rallies. Unless this level is surpassed and sustained, it is highly unlikely that any further rally is expected in live prices. It is interesting to note that the select cutout values are as near the choice value as any time in recent history. This may reflect the country’s economic slowdown and consumer buying habits contracting to cheaper cuts of beef. There has still been no word on the South Korean or Japanese markets reopening to American beef imports, so the export market continues to remain relatively light.
With cattle numbers expected to increase as we move into spring, and weights still well above a year ago, beef production should be ample enough to curtail any long rallies at this time. With commodity funds heavy longs in the cattle futures market at this time, the premiums in the futures have increased dramatically since the first of the year. This is providing the possibility for producers to lock-in some inventory through the fall months.
The hog market, on the other hand, has begun to lose ground as we move into March. After spending most of February with improving prices, the hog market has once again begun to see prices slide lower. Numbers have decreased slightly, but the effects of recent large runs have left the amount of pork in storage enough to cause packers to slow their accumulation of live inventory.
The fact that the Easter holiday is coming early this year has recently slowed the pork product market and, as a result, pork cutouts have leveled off and actually begun to drift lower. This is forcing the packer to retreat in his acquiring live inventory, thus softening the prices in the live market.
The export market continues to be a bright spot and should help stabilize the market at lower levels in the weeks ahead. Until then look for hog prices to slump through the first half of March. Producers should continue to take advantage of the generous premiums the futures markets continue to provide and lock-in inventories.

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