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Lean Hog Commentary
Cattle hitting limit down, and the hog market concerned over Friday's Hogs and Pigs report, helped push hog futures to new lows for this downtrend.
The average trade guess for Friday's report is a herd 1.2% higher than last year. That is seen composed of a breeding herd 0.5% larger and a marketing herd 1.3% higher. The estimates for the hog kill over the next three months, from the marketing herd +180 lbs and 120 - 179 lbs. is seen 2.9% and 2.3% larger respectively. Allendale's estimates were +3.5% and +2.6% respectively. We actually consider this to be good news. Recent weeks' kills would give you the impression we should be 4% over. This is a big deal as the coming Q4 will represent a new record for any quarter of all time. The size of this record will determine if/how long we challenge slaughter capacity.
The issue for us is that this report was surveyed on September 1. Likely, after the $13 drop in prices since September 1, we have taken a little bullishness out of the crowd. Don't forget though, that with $61 lean breakevens no one is losing any real money yet.
Though we do believe this market is overdone we have no interest in betting money on it.
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