The livestock markets have experienced a very choppy trade over the past few weeks as prices moved at times very erratically. Overall, the live cattle and the hog have moved higher over the past few weeks as the cash and product markets rallied. The exception was the feeder cattle market which reacted to the increasing corn market which put pressure on price in both the cash trade and the futures trade. Overall, the next few weeks in these markets could set the tone for the livestock markets as for the direction in price direction into the summer months.
Cattle — both futures and cash — have rallied since the start of the month of May. The cash trade has been the catalyst of the advancement as packers became slightly more aggressive in accumulating inventories. This was primarily due to the increasing boxed beef prices paid by the end users.
One noticeable problem is as prices have gone up in the boxed beef trade, the volume has gone down. This may portend that at some point the boxed beef prices may top, which in turn could top the prices paid by the packer for cattle.
At this time, the number of cattle available appear to be more than adequate to meet the packer’s needs. Therefore, the possibility for a top in a further price advancement in the cattle market are getting less likely in the days ahead. If the demand for beef were to suddenly pick up, there would be a possibility for the current recovery rally to extend. The next few weeks will set the tone for the cattle market; but at this juncture the facts are trying to point to lower prices.
The hog market has been on fire since the beginning of the year. Demand for pork products has been the major factor behind the current — along with the decreased number of available market ready animals. However, as the prices have risen, the demand for pork has slightly decreased; which may signal an end to the recent rally.
Technically, the market is overbought and could be subject to a correction. Historically, the hog market tops in this time period from May to July. Therefore, the next few weeks and months could be very interesting and we may see some changes to the hog market.
Joe Teale is a commodity broker for Great Plains Commodity in Afton, Minn.