Live Cattle: Though we took some of the demand concerns off the hot plate on Monday, the trade got renewed concerns from higher corn prices. While the talking heads on TV are talking about today's stock market rebound, we have corn concerns taking their place. The concern on the corn end is renewed higher prices could cause feedlots, which are losing $100 per head on outgoing cattle, could market cattle early and flood the market with cattle. It has not happened yet, but that has been an issue the trade has debated for some time. On the cash cattle end, Friday afternoon's cash cattle action saw a $2 rebound to $145 on a dressed basis and no change in live action at $90. So far, we have nothing to change in our outlook. Cattle slaughter will start rising, on a percentage change from last year basis in mid to late April and remain higher than last year through at least July. That is because five of the last six months we have seen higher placements. Those "extra" cattle will become an issue shortly. We also will note any economic fixes the government and Federal Reserve have enacted will take months to hit the economy. We likely have to plug in lower demand in the mean time. Higher supplies and lower demand compared with last year should equal lower prices than last year. Our target for June futures is the $82 to $85 area. In other news you likely heard on Sunday an explosion happened at Cargill's Booneville, Arkansas beef processing plant. This had no, and will not have any, price impact as it only processes beef into further cuts and does not slaughter live cattle. You could argue a small impact on the wholesale beef end could be seen, but it is apparent from Monday's wholesale trade that no one is concerned. It is an unfortunate accident, which luckily did not hurt anyone. The biggest impact will not be on live cattle markets, but on the local economy of the supporting towns as Cargill will take some time to decide what to do with the plant.
Lean Hogs: We have said for a couple weeks "if" wholesale pork markets could stabilize, we would look at buying the recently discounted April or May futures. Current cash hog prices are in the $52 range, while April futures appear rightly priced for a rebound to $56. The May contract still has that gap from $69 to $69.50, which could be a target for technical (chart) traders. We also noted Monday morning that last Thursday's higher futures were done with a big jump in open interest (new money) coming in. That is supportive. For now we can turn a little supportive to this market for speculative trading. In the big picture, most 2008 contracts are overvalued and we are happy with our hedges.
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