Published: September 18, 2008 04:59 pm            

Livestock Angles: Drop in cattle, hog prices

Originally published in the Sept. 19, 2008, print edition.

The first week of September has not been kind to cattle and hog prices as both have tumbled as cutouts have plummeted forcing the packers to reduce their bids for live inventory.

The cattle market has seen no better than steady money for prices the past several weeks as the futures trade has dictated the direction of the market by slipping consistently under general fund liquidation.

With the futures contracts carrying huge premiums to the cash, this has done not more than re-adjust the basis and changed the psychology of the market in the short term. It appears that the beef cutouts are beginning to stabilize in the mid-$150’s per hundredweight basis choice and the volume in the boxed beef is expanding with the lower prices.

Export business has been improving with the lower prices and with the numbers of market-ready cattle expected to decline over the next few months, the prospects for some improvement in finished prices could be anticipated. The overall long-term picture continues to remain the same which is still for prices to decline into next year as demand remains in question due to economic slowdown worldwide. Therefore, producers should stay current and be prepared to lock-in inventories scheduled for marketing in the latter part of the year to the early part of next year.

The hog market has been on a downward slide since topping during the first week in August. The rise in the dollar over the past 30 days has slowed the export market which was a major component of the summer rally and thus has curtailed the overall demand for pork.

With the large slaughter seen all year, the availability of product and the reduction in demand has caused the collapse in prices during the past month. However, as the cutouts have declined the volume in the pork product has increased in recent days, giving an indication that the lower prices are re-igniting demand once again.

Weights of hogs have begun to decline which should have a positive effect on the market as total production of pork is decreasing and with the possibility of increasing demand a rally in hog prices maybe on the horizon. From a seasonal outlook, the hog market generally bottoms in this time frame which also gives some support to an outlook of higher prices in the weeks ahead.

Producers should remain current with their marketing and use excessive premiums to lock-in winter and spring inventories.

        

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