Hogs might flirt with a top, while cattle stays strong

By Rich Nelson

Hogs: It would be hard to say hog futures are trying to put a top in. Instead, you could suggest Wednesday’s trade was simply a small amount of introspection. Grain markets have seen some trouble this week, partially on concerns for a China growth slowdown. This can spill over into pork as well.

China is the No. 3 buyer of U.S. exports. As exports are 24% of U.S. demand, China purchases about 3% of all pork produced in this country. We would expect lower pork exports to them first due to the negative hog production margins they have had since December. Low hog prices deter buying from the U.S. The concern about their economy is a secondary issue.

A 20% year-over-year decline to China this year would cut 0.6% off U.S. demand base. This still pales in comparison to this year’s PED problems, but it is something to give this uptrend a pause. In other news, there will be heavy interest in the afternoon weekly PED report. Last week’s report suggested the peak weekly finding was 306 for the week ending Feb 9. The week after was 303 and the most recent week fell to 252. Will tonight’s update confirm that the worst (of the weekly findings) is behind us?…Rich Nelson

Cattle: At the time of this writing, there has been no cash cattle trading to report. Most packers were holding on to $146 bids, though we have heard talk they were willing to move up to steady with last week ($148).

While the smallest kill week of the year is behind us, this week’s run won’t be a big one. Kill levels won’t noticeable improve until April. Additionally, due to the past few days of rising pork prices, we now have record wholesale beef prices. That has given beef packers a narrow window of time for profitable operations. The trade is eager to see how this one plays out.

For the big picture, this week’s cash trading is not the be-all-end-all. This is a temporary period of time before market-ready cattle numbers build back up.

In other news, agriculture markets received an update on negotiations for the US/EU trade pact. Along with concern over EU protections with GMO grain and dairy products, the EU is not budging too much on hormone-treated beef. With eight months of negotiations behind us, it would appear the ban on U.S. beef will remain in place. This is not an issue that will affect U.S. meat prices. The U.S. meat industry does not expect their stance to change…Rich Nelson

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