Cattle Drop First Time This Week on Demand Concern; Hogs Gain
This article by Lydia Mulvany for Bloomberg may be of interest to subscribers. Here is a section:
While supplies remain tight, high prices may spur a slowdown in demand, Chad Henderson, president of Brookfield, Wis.- based Prime Agricultural Consultants Inc., says in a telephone interview
“Even the most bullish markets can’t go up every day. It’s a pause, and the real question as we move forward is what are consumers going to do, and will we see a slowdown in demand?”
Cattle prices are no longer in backwardation across the curve but that is not unusual for this time of year considering how cyclical the slaughter schedule is. Last year’s drought and the high price of feed contributed to the present shortage of both cattle and hogs. The result of this year’s rally is that demand for calves and suckling pigs will have increased as farmers aim to profit from the high prices. Therefore this scenario is unlikely to be an exception to the commodity market adage that “the cure for high prices is high prices.”
Feeder Cattle prices are accelerating higher and are now almost 20% overextended relative to the 200-day MA. Every upward acceleration will look like the strongest market in the world until it stops and there is no evidence yet that it is over. Two consecutive limit-down days or a similar decline held for more than a week or two would be required to signal a medium-term peak is in place.