MORNING LIVESTOCK REPORT Tuesday August 19, 2008
LEAN HOGS
Good morning! Lean hog futures traded higher during the first session of the week but prices drifted downward late with the settlements near their session lows. We appear to be at a major cross road in the hog complex. Will the discounted board hold and work upward toward the cash? Or, will the cash and cutout begin to tumble under the weight of expanding production, driving the board lower in the process? Impressive demand for U.S. pork has been responsible for the strong hog prices this summer. The price strength has occurred despite consistently large production. Weekly hog slaughter over the last six weeks has been running up 6% to up 8% from last year. If these trends hold into the fall season, we're going to experience some extremely large kill rates. It's my opinion that demand for U.S. pork, currently at record high prices, will cool a bit until prices edge back downward. Monday's kill was large at 428,000 compared to 421,000 last Monday and 403,000 last year. The pork cutout was down .41 at 94.00. Fresh bellies were quoted down 7 cents at 88 cents. Loins were firm in a very light test and hams went untested. Average hog weights are expected to bottom out, adding total tonnage to the pork pipeline this fall. I'm in favor of selling early strength in the Oct and Dec today. My opening call is steady to higher based upon the strength in the electronic hogs. The early cash call is steady.
LIVE CATTLE
Live cattle futures bounced hard and fast on Monday but then spent most of the session trading slightly higher than Friday's close. Futures suffered a negative performance last Friday. The steady cash activity last week proved disappointing to the bullish trade (including myself). There's no cash trade yet this week and likely won't be until late this week. The USDA will issue a cattle-on-feed report Friday afternoon. This report will outline placements during July. Current supplies of fed cattle continue to tighten. Despite light volume trade in TX and KS last week, the active trade in NE is keeping the total show list manageable. I'm expecting a rally in the live cattle futures but I'm concerned about the technical pattern developing. I'm on the sidelines. My opening call is steady to higher across the board.
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