As we close in on the end of the month of October, the livestock markets have — for the most part — seen prices generally moving higher. The cattle complex as a whole has seen a fairly good advance in prices while the hogs are just trying to find a foothold in moving prices higher. The coming winter months are likely to see a continuation of high volatility in the hogs while the cattle may remain a little more benign. It is likely the key factor over the next few months will be the export picture for the entire meat complex which will determine which direction the hog and cattle markets will eventually head.
The cattle market has shown surprising strength as of late as many in the industry forecast lower prices during the month of October. Strength in the choice and prime beef have been exceptionally strong recently. This has forced the packer to try to accumulate cattle in that category. Thus the spread between choice and select beef has widen over the past month giving rise to the strong prices paid for live inventories.
On Oct. 25, the U.S. Department of Agriculture released the monthly Cattle on Feed report which was seen as neutral as all categories right on with pre-report estimates. Once again, the demand for beef versus the supply will be the answer to the final direction the market will take in the next few months. It appears the export market will be a major factor in that determination of which direction prices will take. Producers should continue to monitor market conditions and whether to protect inventories.
One thing the hog market has not lost in the last month is the volatility in price movement. We have not seen hog prices actually move in one direction for a long period of time since back in July of this year. Despite the fact that the range of price movement has not been large, it has moved up and down in extreme moves over the past several months.
China continues to be the prime accelerant in moving the market prices in either direction. If and when an agreement between China and the United States is either signed or dropped, this will give the market direction whether up or down. Until these negotiations come to an end, hog prices are likely to remain extremely volatile in either direction. Given the fact that the cause of this volatility started with the outbreak of African swine fever in Asia and seems to be still spreading. The overall number of hogs in the world has been reduced and this could play into future price direction if not controlled. This should keep producers in close contact with market conditions and should response to change in conditions to protect inventories.