Bullish hog and cattle traders are counting on a pre-Independence Day buying binge to prop up their fading markets.
Meat retailers are expected to have much of their beef and pork purchases booked this week in preparation for the July 4 weekend, a popular grilling holiday, analysts say. The strength of that demand will be key to whether cattle and hog futures can recoup lost ground from recent sell-offs.
“This week is pretty critical for hogs,” said Jim Burns, an independent livestock trader at CME Group in Chicago. “We have fewer hogs, but do we have the demand for it.”
Livestock futures tumbled over the past month as a stock market swoon and high unemployment stirred concern whether consumers will pay for pricier steaks and chops.
At today’s close, CME July lean hogs rose 0.05 cent to 80.1 cents per pound, down 8.7 percent from a contract high of 87.75 cents on April 23. August live cattle rose 0.675 cent to 88.8 cents a pound, down 7.1 percent from a contract high of 95.55 cents May 11.
Wholesale pork and beef prices have plunged after soaring near two-year highs during May, a downturn that some analysts and traders say may help stimulate demand.
Choice boxed beef averaged $1.5313 a pound at wholesale yesterday, according to USDA data. While that’s down 11 percent from a peak of $1.714 May 11, prices are still up more than 9 percent from the average for June 2009.
Pork cutouts averaged 82.73 cents a pound yesterday, down 9.9 percent from a peak of 91.81 cents May 14 and near a two-month low.
Despite the drop in wholesale prices, beef and pork at retail remains relatively expensive, said Bob Short, senior livestock analyst with PFGBest in Chicago.
During April, beef and veal average prices rose 2.8 percent from March and 1.3 percent from April 2009, according to the U.S. Bureau of Labor Statistics.
Still, Short said it’s likely both cattle and hog futures climb over the next couple weeks.
“This is the time of year when you (gain) something back” in product market prices, Short said. “Unless the stock market implodes, the pork is going to work itself back.”
“The market is going to be afraid of the short side for one to two weeks,” Short added. “You’re looking at some sort of popcorn rally that will not last.”
Cattle fundamentals are getting “worse and worse,” Short said, citing rising on-feed inventories and the prospect of slower beef demand.
Burns, the CME hog trader, said price action in cash and futures markets this week suggests the market has established a short-term bottom. He said he’s bullish on hog prices toward the end of this year, holding a “lightly long” position in October futures.
That contract is “too cheap… with the reduced number of hogs coming in the pipeline,” he said.