Livestock Angles: Beef prices seem to have found limit

March 28, 2008 03:07 am

— The livestock markets have not started March on a very positive note. Both cash cattle and cash hogs have been under pressure as prices have slipped for the first few weeks of the month.
Once again the cattle market has failed to sustain any type of rally for any length of time. It would appear that the inability of the choice beef cutout to advance and maintain above $150 per hundredweight with some volume is the main reason for the failure of cash prices to advance.
This would continue to indicate demand for beef definitely has a price barrier and that barrier lies above $150/cwt. for choice beef.
With the economy floundering and inflation surging, the American consumer appears to be making a statement that there is a limit on what they will pay for beef. This has put the packer in a position of limiting how much they will aggressively bid for live inventory.
With no news regarding South Korea and Japan, the export market continues to remain relatively quiet. With cattle weights still above last year, overall beef production is more than adequate to meet the demand at this time.
Despite the negative outlook, the market appears to be overdone and in need of a bounce which could be lead by the futures market. This should provide an opportunity for producers to hedge inventory over the next several weeks.
The hog market has gone through another liquidation phase as prices have dropped almost straight down since they peaked in February. Pressure from continued large slaughter has given the packer ample supplies of pork and kept prices on the defensive. The high price of grains has put the pork producer in a very precarious position and forced many producers to liquidate their inventories.
On the bright side, domestic demand for pork product remains excellent. The volume of product has remained high on a weekly basis and export business continues to expand. With the prospect of feed costs remaining high for some time, further herd liquidation should be anticipated. This will more than likely keep pressure on prices through the spring months. However, the longer-term outlook will vastly improve unless feed costs come down quickly — which seems doubtful at this time.
Therefore, hog prices should improve in the third and fourth quarters of the year. Until then producers should use rallies to lock in spring and summer inventories.

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