While cattle and hog futures in Chicago sagged today, cash markets and beef and pork prices probably will continue to march higher this week, analysts say.
Tighter supplies of slaughter-ready animals should underpin both markets, analysts said. Additionally, spring fieldwork will keep many Midwest farmers occupied this week, further crimping the flow of pigs to market, livestock analyst Bob Short said.
The onset of spring fieldwork “should keep the cash hog market tight to higher” this week, said Short, who’s with broker PFGBest in Chicago. “The fundamentals in pork are going to get better.”
Still, cash hog markets eroded early today. Carcass prices in major Midwest markets averaged $73.24 to $73.58 per hundred pounds this morning, on average, down 34 cents to 79 cents, according to USDA reports.
Hogs averaged $73.98 per hundredweight on a carcass basis at the end of last week, up $2.90, or 4.1 percent, from the previous week.
In CME Group futures, April lean hogs rose 0.15 cent to 76.225 cents a pound. Most deferred contracts fell, with June hogs down 0.4 cent at 83.875 cents.
Little has changed in a bullish fundamental picture for cattle and hogs, analysts and traders said. Livestock inventories shrunk after losses the previous two years prompted producers to cut herds. Meanwhile, the U.S. economy’s improvement and the impending summer grilling season have boosted demand prospects for beef and pork.
In an April 9 report, the USDA hiked forecasts for second- and third-quarter cattle and hog prices, saying tight supplies prices will lead to “sharply” higher prices than previously estimated.
In cattle, futures prices topped $1 a pound last week for the first time since September 2008.
In futures trading, April cattle fell 0.65 cent to 99 cents a pound, while June cattle fell 0.7 cent to 94.05 cents.
The steep run-up in beef prices could be a stumbling block for the cattle rally, Short said.
So far, food retailers have largely absorbed rising wholesale beef costs rather than raise prices in the supermarket meat case, fearful of turning off consumers, Short said. That’s unlikely to continue much longer, he said.
“You’ve got to worry that somewhere, we’re going to price ourselves out of business” in beef, Short said. Retailers are “either going to have to stop buying beef and start buying pork, or raise prices for beef.”
“Market psychology is key this week and next,” Short said. “At the moment, everything is hot to trot” for bullish traders.
“Markets are to be bought on breaks in hogs and not to be trusted in cattle for the month of April,” Short said.