Lean Hogs: In the monthly Cold Storage report USDA gives us an idea of stock levels of various food products in warehouses. They cover meats, fruits and veggies, and other items. The amount of total (all cuts combined) pork in storage houses in the US was put at a record 657 million lbs. This represented a 51 million lb increase from last month. That increase from the previous month was the largest gain in March. Let's put this into perspective. Normally stocks decline 6 million lbs in March. Instead they increased by 51 million lbs. After the report electronic futures, which trade longer than the pit, closed unchanged from the pit session. We would expect this bearish total pork news to pressure lean hog futures 20 to 30 cents off Tuesday's open. The other section of this report we follow is pork belly stocks. We had forecast that category to jump to 95 million lbs. It came it at 99 million lbs. That is the largest since 1999 and the largest one-month gain in March since 1988. We would call pork belly futures to open 40 to 50 cents lower tomorrow morning. Much of the pork belly number was likely already in the market. For the overall short-term lean hog futures picture bulls are in control. We do feel most futures are overpriced in the big picture. The only question is when will this recent run peak (if it has not already). Key support on the June Lean Hog contract is $72.80.
Cattle in the Very Short Term: Warm weather buying is holding this market up. Today's wholesale beef price change was up $1.91 and $1.79 for choice and select respectively. There is also a good chance for cash cattle to pick up another $1 this week. Essentially demand is still increasing and supplies are not burdensome yet. We expect this to last through this week.
Cattle Medium Term: In May and June supplies will grow sharply. Last week's kill was 676,000 head. At the peak of supplies in mid-June we will get up to around 740,000 head. We have not been marketing cattle timely and we have those extra winter placed cattle coming out soon. We have increased our South Korea export estimate and added $3 to our June downside target. It is now at $88, which is still bearish. Hold the 100% hedges we have on the June and August. We are also watching that bear spread we talked about. The spread between buying December and selling June peaked at $14.50 and is now $11.75. That spread may contract for the next week or so as bulls are in control. Once these slaughter levels begin to pick up that spread could be a good gainer.
Cattle Long Term: After this summer supplies will tighten sharply. Placements will remain below year ago levels for the next four months or so. Do not add any fall or winter hedges.
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