Published: April 11, 2008 10:12 am            

Livestock Angles: Demand, exports, weights weigh on market

Originally published in the April 4, 2008, print edition.

The cattle market has not had much good news lately, and prices have slipped accordingly as we finish out the last week of March.

Several factors have been affecting the market, but primarily it has been the sluggish demand for beef. Beef cutouts have declined from the resistant $150 per hundredweight area but the volume in the boxed beef trade has not picked up as has been the case in the past. This has put the packer in a precarious position and forced them to act extremely defensive in acquiring inventory. Another factor that has been a burden on prices has been the weight of animals.

Slaughter weights continue to remain above last year and the five-year average which has kept total beef production well ahead of a year ago. This increase in supplies and a weakening domestic demand and an export market that is still lagging are being felt by the producer in the form of weaker cash prices.

With the supplies of competitive meats available, the outlook for any sustained rallies in the cattle market appears to be slim. This does not mean however that some recovery in prices over short periods of time is not possible. Because of the current situation, producers should use these recovery rallies to lock-in inventories whenever possible.

The hog market was on a slight recovery until the U.S. Department of Agriculture released the Quarterly Hogs and Pigs Report on March 28.

The results were as follows: all hogs and pigs as of March 1, 107 percent; kept for breeding, 100 percent; kept for marketing, 107 percent. These numbers were interpreted as bearish by the trade since the all-hog-and-pig number and the kept-for-marketing number was well above the highest pre-report guesses.

This should put the futures market on the defensive, especially the deferred contracts as many analysts believed producers were liquidating the herd because of high grain prices. Obviously this is not the case.

Considering the amount of pork in cold storage and the fact that the herd size is large than expected, the hog market will likely remain under some pressure into the summer months. The bright spot of the hog market remains the export area where there continues to be expansion of markets.

This is unlikely to stop the slide in prices as total pork production remains high. Producers should lock-in any premiums in summer prices especially if recovery rallies occur from markets being oversold.

        

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