The cattle market is continuing to struggle in a trading range in the lower $90s per hundredweight to the upper $80s/cwt. basis the Midwest. Demand appears to be the major problem that keeps the cattle market from moving higher.
The boxed beef trade is reflective of this demand as prices have also remained in a trading range between $150 to $140/cwt. basis choice. Each time the cutout values move above the $150/cwt. area the volume in the boxes dries up, indicating the reluctance by the retailer to chase the price any higher.
With the packer margin continuing to remain just barely satisfactory, their bids for live inventory are tentative at best, thus the sluggish cash trade over the past several weeks. As yet there has been little progress in reopening the South Korean and Japanese markets which is continuing to weigh on the export market and overall demand.
With the cutouts once again failing to punch through and hold above the $150/cwt. level basis choice, look for the cash market to remain soft and unlikely to sustain any long-term rallies at this point. The futures market shows fairly decent premiums at this time, and producers should consider the possibility of hedging spring and summer inventories.
With the recent pick-up in activity in the feeder market and the quick advances in prices in that market, one would suspect that placements may increase in the upcoming U.S. Department of Agriculture Monthly Cattle on Feed reports. This could make deferred futures contracts vulnerable to some deterioration in the weeks ahead.
The hog market has begun to finally find some underlying strength over the past few weeks. Weather has played a big factor in the current upturn in the market as cold weather coupled with some snow has hampered marketings.
Demand for pork has remained good throughout the period which has aided in the packers’ quest to continue to accumulate live inventory. It appears that the large numbers of hogs being marketed has now peaked and will likely level off over the next few months. A strong demand for pork product should assist in keeping prices above last fall’s lows.
The futures market continues to carry fairly large premiums throughout the remainder of the year. This optimism has developed in part due to speculation that hog numbers will decline because of the high grain costs.
Excessive premiums could offer producers an opportunity to lock-in their inventories through the fall period, if they occur.
Joe Teale is a commodity broker for Great Plains Commodity in Afton, Minn.