Joe Teale

So far April has turned out to be a good month for livestock prices. Both the cattle and hog markets have gone to higher prices mainly on export demand.

The cattle market after slumping early in the month has come on strong in the latter half of the month buoyed by improving cutouts. These improved cutouts have improved the packer margin, and in turn the packer became more aggressive in acquiring inventory.

Export business has improved since the first of the year and this has helped bolster the move in beef prices. The unfortunate thing is it appears that domestic demand is once again beginning to decline as prices move higher. As beef cutouts have moved above the $150 per hundredweight level basis choice, the volume of the boxed beef trade has diminished. This has been the case for almost a year now.

We are now in the most active seasonal demand period which normally peaks in early May. If prices can continue to advance through this time period we can expect prices to continue to advance into the summer time frame. Considering the fact that weights remain heavy and cattle numbers are at their peak now, from a supply standpoint there should be ample supplies of beef.

The next few weeks will be significant for the direction of the cattle market into the summer months. Producers should be on alert to lock-in summer inventories on the first signs of weakness developing in the market.

The hog market seems like it is on a mission lately as prices have advanced significantly during April. Pork product demand has been the main reason for the current rally, despite the fact that pork production has remained extremely high.

Lately export demand and domestic consumption have been the main catalyst behind the stronger prices. This coupled with considerable speculation in the futures market has propelled prices rapidly in recent weeks.

There are concerns that because of the high grain prices the hog herd is being liquidated and that numbers next fall will not be sufficient to accommodate the current demand. This has seen large premiums build into the futures market and bolstered enthusiasm toward higher prices.

The next few weeks for the hog market will be critical as to the direction the market takes into the summer months. Like the cattle market, the hog market usually experiences a seasonal top near or around the first of May. Therefore, producers should consider some protection utilizing the extreme premiums offered currently in the summer month contracts.

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Joe Teale is a commodity broker for Great Plains Commodity in Afton, Minn.

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