Can Hog Strength Continue?

Hogs found little strength in futures Monday on top of stronger pork cutout values.

By Robin Schmahl DTN Contributing Analyst

Cattle: Lower Futures: Mixed Live Equiv: $276.44 -$0.75*

Hogs: Higher Futures: Higher Lean Equiv: $104.68 +$1.61**

*Based on the formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equiv. The index has been updated to depict recent changes in live cattle weights and grading percentages.)

** based on formula estimating lean hog equivalent of gross packer revenue.

GENERAL COMMENTS:

Both feeder cattle futures and live cattle futures struggled with finding direction Monday, both closing slightly higher on the day. Sale barn reports have been all over the place with some still seeing strong buying interest and others leaving producers disappointed or choosing to “no sale” the cattle. Packers have a steady flow of cattle to slaughter currently, although placement numbers have many traders questioning the long-term availability of feeders.

Hog futures are finding some support to start the week off from a technical perspective. From a fundamental perspective, pork cutout values were higher Monday giving a little extra boost to the market.

	BULL SIDE		BEAR SIDE
1)	Increasing feed and fuel costs make producers less likely to feed to higher weights, giving a long-term bullish outlook due to the pounds of meat the market could be missing out on.	1)	Availability of cattle for slaughter is plentiful, putting packers in control.
2)	Lower placement numbers on the latest Cattle on Feed report bring concern for the longer-term number of cattle available for slaughter.	2)	Consumer distrust in imported beef may cause some tension when choosing a protein source in the grocery store.
3)	Pork cutout values find strength in the short term.	3)	Hog index values have been lower, along with price pressure from a lower Daily Direct Hog report.
4)	Hog futures are finding technical support in an oversold market.	4)	Heavier dressed weights offer plenty of pork to the market.

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CDT. Also, stay tuned to our Quick Takes throughout the day for periodic updates on the futures markets.

Robin Schmahl can be reached at rschmahl@agdairy.com