Livestock Providing an Opportunity
A recent price recovery in both live cattle and lean hog futures contracts is offering an opportunity for producers to lock in better prices than existed just a few weeks ago. Many farmers may have held little hope for a price recovery. Expectations for big inventory and cheap feed usually suggest that cattle and hog numbers will increase, which leads to steady to lower prices. However, a weaker U.S. dollar and strong speculative buying, as well as technical short covering, have provided a lift in both commodities, proving an opportunity for producers to shift risk.
This week the February cattle contract placed a double top on the charts, with futures rallying $10.00 since the end of August, matching the June 6 high of $122.75. April live cattle futures rallied to new contract highs, also experiencing a similar type rally of more than $12.00. Hog futures in 2018 summer months are offering excellent value, with both the June and July contracts breaching the $80.00 level and scoring new contract highs. This is an impressive rally off of recent lows established near $74.00 at the end of August.
Cheap and readily available feed supplies will lead to herd expansion. There have been five large crops since the drought shortened the 2012 crop. This suggests livestock herds have been building. View the recent rally as a bonus. Prices are currently higher than many believe they should be. Don't let this opportunity escape. Good demand and a strong flow of investment money into livestock have been supportive. Yet, both of these can ebb and flow rather quickly. Should money flow out of livestock, demand softens, or both, prices could move down just as quickly as, or even faster than, they moved up.
The bottom line is that livestock producers should not fall asleep at the switch. Inventory management is a critical component of any livestock operation. Your inventory has just gained value. Make sure you keep it.
If you have questions or comments contact Top Farmer at 1-800-TOPFARM, ext. 129.
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