Sell those hogs

July 30, 2014 10:59 AM

Lean Hogs (CME:LHQ14)

It is difficult to point to the exact reason for the sharp sell-off in lean hog futures but I think we need to start with lower cash markets and lower product at mid-session. Fund liquidation, end of month margin selling and technical sell stops added to the sharply lower to limit down move. The sharply higher U.S. Dollar also raises concerns about potential cut in pork exports.

Hog weights are declining as slaughter is higher than a week ago. Many are asking if the tight supplies from PEDv losses isover. The data would suggest not because the highest number of PEDv cases were reported in late February.

Some thoughts on the increased numbers coming to market: We are hearing producers are concerned about a seasonal top being made in cash hogs therefore they want to get more current on marketing’s before prices go lower. With weights 13 to 14 heavier than a year ago, there are plenty of hogs to market before we get to historical current weights.

The 2nd quarter U.S. GDP climbed 4%, which was much higher than the 3% growth rate expected. Growth in inventories contributed 1.66 percentage points. The higher than expected GDP number was a boost to the US Dollar, which makes US products more expensive on the world market.

Live Cattle (CME:LEQ14)

The Bullish psychology is in charge!

Tight supplies of market ready cattle and strong retail demand equals higher prices. There is no fundamental change that says the top is in.

However, the saying “All things that go up must come down” is true, but from what price? Maybe it is time to use some risk management to lock in profits.

Trade is waiting for the packers to buy cattle this week. A steady to higher trade is expected but after last week’s jump in fed cattle prices, packers may not be as aggressive. They will also call in any contracted cattle to fill immediate needs as we roll the calendar to a new month.

Midday beef values were higher with choice up 1.69 and select up 2.47.

The USDA releases its monthly estimates of retail meat and poultry prices. Beef and pork prices once again set record highs while chicken and turkey prices remained high relative to historical levels, but lower than their records of last fall. The details for June prices are: The choice-grade beef price crept ever-closer to $6.00 per pound, hitting $5.938 for the month. That price is 0.4% higher than May’s previous record high and 12.6% higher than one year ago. Select-grade beef averaged $5.466 per pound in June, which was 0.8% higher than that of May and 12.1% higher than one year ago.

Cargill today announced that it will close its Milwaukee, Wis., beef harvest facility, which employs approximately 600 people, effective at the close of business, Friday, Aug. 1, 2014. The closure of the facility results primarily from the tight cattle supply brought about by producers retaining cattle for herd expansion. The ground beef plant at the site will remain open to meet customer needs, employing approximately 200 people. Cargill’s six other U.S. beef harvest plants are unaffected.

About the Author

Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. Jim McCormick is Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA.