The Land — Since the first of the year the livestock markets have been rallying to near last year’s highest levels.
Both hogs and cattle have seen a resurgence of bullish sentiment as well as good technical buying in the future market. Are we seeing a trend start here or are we nearing the end of a post-holiday rally. With the economy still struggling it will likely cause the livestock markets to struggle also.
The cattle market has benefited slightly from the winter storms that have rolled through the Upper Midwest over the past few weeks. This has caused marketing and transportation problems as well as some weight loss in animals due to cold conditions.
Since the movement of beef through the Christmas and New Year holidays was light the retailers were caught a bit short and the weather just enhanced the tightness in retail level, prices at the wholesale level have increased once again over the $140 per hundredweight level basis choice.
This has been a key area in the past on the follow-through of consumer demand and should once again be the determining factor on whether we see higher fed cattle prices or run into such resistance that the packer has to back away to protect profit margins.
The next few weeks will likely be the most important for setting the tone of the cattle market for the entire first quarter of the year. Producers should approach this period with a degree of skepticism and use the current strength to protect inventories.
The hog market has seen prices advance to near last year’s highs supported by extreme weather conditions in the majority of the hog-producing areas. The fact that the movement of pork product through the holiday period was quite slow, retailers had to scramble to restock and therefore push pork cutout values well above $70/cwt.
This area has proven to be a tough area to continue to move pork product and this time should be no exception. Volume in product movement has already begun to slow and will likely continue if cutout values continue to move higher. As the effects of the winter storms diminish, look for a more-normal marketing of hogs and slaughter to remain large enough to meet current needs.
This will likely cause at least a slowdown in the recent advance in prices if not top the market for a period of time.
The economy will be the major factor in the overall outlook for the pork market over the next several months. Producers should protect at least some of their inventory on the current rally and approach the market with cautious optimism.
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Joe Teale is a commodity broker for Great Plains Commodity in Afton, Minn.
