The livestock markets spent the last few weeks in relatively narrow trading ranges. The cattle and hog markets saw prices slip during the period reflecting the Thanksgiving holiday slowdown in the demand for red meat.
The cattle market came under some pressure as demand for product slowed as cutout values moved over $140 per hundredweight basis choice. This area in the cutouts has been a nemesis for quite some time and once again stopped the retailer from aggressively buying product.
With the dollar under pressure the export demand has remained fairly constant keeping a firm floor under the market. With cattle numbers once again on the increase through the remainder of the year, the expectation of a strong rally seems limited at this time.
On Nov. 20, the U.S. Department of Agriculture released a monthly Cattle on Feed Report which indicated cattle on feed as of Nov. 1 at 101 percent of a year ago. Placements during October were put at 101 percent and marketed during October were 97 percent. The report is seen as slightly friendly since placements were a little less than projected, but it is not likely to have a major impact on the market.
The trade through the Thanksgiving week is likely to be slow and remain near steady with current prices. Demand will remain the key to the direction of the market through the remainder of the year and not the supply. The Futures market still maintains very good premiums in the deferred cattle contracts and with any reactionary rally from the cattle on feed report, should give producers the opportunity to lock inventories.
The hog market has been a real roller coaster ride the past several weeks as prices have rallied then dropped to remain nearly steady with the beginning of the month. Hog numbers have been large through most of the year keeping prices in check while outside influences also kept the market on its heels.
With the U.S. dollar sliding lower in recent weeks, the export market has seen a real resurgence in foreign demand which has helped stabilize the market. Pork cutout have remained in a fairly narrow trading range over the past several weeks, reflecting what appears to be a shift in demand toward pork products. The latest USDA Cold Storage Report released on Nov. 20 showed that pork stocks in storage were lower than anticipated, reflecting a good demand for pork products.
If export demand can remain strong, this will assist in keeping live prices on a more firm footing even though the Thanksgiving holiday where it is expected to be slow. Hog futures still carry large premiums in the deferred contracts and with no real sign of inventory contraction in the industry, producers should be cautious in their approach to their marketing scheme and use these premiums to their advantage.
Joe Teale is a commodity broker for Great Plains Commodity in Afton, Minn.
