Choppy Trade in Lean Hogs
MORNING LIVESTOCK REPORT
By Dennis Smith | 312-242-7905
Follow me on Twitter @denniscattle
I’m expecting another choppy trade in lean hog futures today. Overall, the bullish environment should drive prices higher. Summer hogs bumped up into contract highs yesterday before pulling back. Front month April pulled back and appears to be consolidating. The extreme weather will subside by early next week. Packer margins remain profitable, look for aggressive Sat kill efforts to quickly absorb the 150k hogs that have been backed up. Prior to the cold snap packers were showing clear signs of stress regarding a short supply of butchers around the corner. So, the scramble has been delayed a week or two. We’ve been accumulating Apr hog calls but will now rest and watch, waiting for confirmation. Despite the lower cutout value yesterday my sources are indicating that hams and bellies are tight. Despite being quoted lower for two days, the carcass is still higher for the week.
By early next week the weather will be returning to normal. Cattle have been hurt, they’ve been set back, that is they’ve lost weight. This is pretty much the case for call cattle on feed. Perhaps in the wake of the cold snap this fact will help swing leverage toward the feedlot as they deal with greedy packers. Beef prices should peak in the next couple of days and then see a general pullback from the highs. I’m told that beef business for export has slowed due to the spike in prices. Weekly export numbers will be released in the morning. We’ve taken a round of profits in the April futures and options. I have no new trade recommendations. Feeders appear to have topped. We’ve been hedging feeders. On-feed comes out tomorrow. Estimates can be found in last night’s wire.
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