By Rich Nelson
Hogs: At this point, we must say this market is entirely a psychology issue. It was noted Tuesday that Friday’s quarterly Hogs and Pigs report will not match any bull’s expectations. The average trade guess is for the hog herd to fall from the Dec. 1 count at 0.7% under last year down to a 5.4% under last year number on March 1. That does not match up with recent slaughter levels that are from 6% to 8% lower than last year.
veryone expects that to fall down to over 10% yr/yr declines by summer. While Wednesday's chart action looks a little better, traders finally rejecting the morning’s sharply lower trade, we would suggest the trade will wait until Friday’s report before deciding if the second gold rush is back on…Rich Nelson
Cattle: Cattle futures gapped higher from Tuesday's afternoon close on the news of those later afternoon $150-$152 sales in the South and $154 in the North. That was a new record. Those new record prices were made despite wholesale beef being almost $3 off last week’s peak from the 18th.
For those asking about how this affects our study from last week, the 15-year average decline from the peak spring high down to the lowest summer low would imply $134 cash coming. That’s not too far off current pricing. August futures are implying $135 at the end of August.
Before we all say this market is properly priced let’s keep in mind that this year’s summer bulge in supplies will be larger than normal. Over the past five months, placements ran 6.6% over last year. For the near future we see a slight increase in supplies next month. The real supply problems will hit this summer. For trading, we are only favoring the sell August/buy December bear spread. We expect to see the August contract to be priced in the $120′s this summer…
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