Published: October 07, 2008 02:00 pm            

Livestock Angles: Cattle skittish over Wall Street fears

Originally published in the Oct. 3, 2008, print edition.

The cattle market has remained nearly steady over the past few weeks.

Extreme uncertainty in the financial arenas has caused the cattle market to reflect that uneasiness on both sides of the supply-demand equation as packers and feeders seem willing to take a cautious approach to their marketing.

The numbers of market-ready cattle do not seem over-burdensome at this point, while movement of boxed beef appears to be sluggish at the same time. This has brought about the nearly steady market prices in all phases of the cattle market.

The heavy cattle that have kept the northern feeding areas at a discount to the southern feeding areas are about cleaned up. As this takes place and the uneasiness of the financial markets ease, prices should attempt to work a little higher over the next 30 to 45 days according to the U.S. Department of Agriculture placement figures of several months ago.

Export business has been a positive as of late and with the U.S. dollar once again falling against most major currencies, this should help continue to keep a strong export market in the near term.

The longer-term outlook will continue to be clouded because of the financial problems that exist today, which could very well hurt demand in the months ahead. Producers are therefore urged to use any rallies in the weeks ahead to continue to protect inventories in the event of adverse market moves.

The hog market has managed to stabilize and improve slightly over the past several weeks, due in part to a renewed interest in export business. After a drop-off in the international demand for pork products as the U.S. dollar rallied sharply last month, a downturn in the currency brought back the good foreign demand which has been a part of the market all year.

This helped solidify the falling prices seen over the past month and initiated a recovery during the past week or two. At the same time as the pork cutouts began to improve, giving the packer better margins to work with, so came the increase in cash prices to the producers.

All eyes in the industry turned to the Sept. 26 USDA Hogs and Pigs Report. As of this writing, most analysts expected a continued reduction in the hog herd as farrowing intentions were expected to be reduced once again due to the high cost of production.

One should be aware that this is only one side of the equation and that demand will dictate the market direction in the months ahead. That would mean that the financial woes that are plaguing the markets now could have long-term effects on the demand for pork regardless of the number of hogs in production.

Producers should be cognizant of the large premiums in the deferred hog contracts and be prudent in protecting inventories in the upcoming months.

        

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