Hogs Surge as U.S. Heat Wave May Curb Weight Gains; Cattle Climb
Temperatures may average 5 degrees Fahrenheit above normal from the Midwest to the East Coast until July 1, with parts of the central U.S. reaching 8 degrees above average, according to Commodity Weather Group LLC. On June 25, the average hog carcass weighed 204.1 pounds (92.6 kilograms), down 1.3 percent from the previous session, government data show. Livestock use more energy to stay cool during hot weather, reducing weights.
“It's been hot enough long enough that gains probably aren't going to be what they were,” Dick Quiter, a broker at McFarland Commodities LLC, said in a telephone interview from Chicago.
“The cattle are not going to perform well in the hot weather, so weight gains should start to decline at a rapid pace,” Mark Schultz, the chief analyst for Northstar Commodity Investment Co. in Minneapolis, said in a telephone interview.
Eoin Treacy's view
My view – Hot dry weather is having a well-publicised
negative impact on corn crops and prices have responded accordingly. In tandem
with short covering, extra demand for cooling has also contributed to the 50%
rise in natural gas prices since April. Feeder cattle prices have pulled back
as feed costs rise.
Feeder cattle posted one of the more consistent uptrends in the commodity complex from the 2009 lows. However, it has lost momentum over the last year and the recent pullback has tested the consistency of the medium-term advance. This week's low near $145 represents a pivotal area where demand will need to continue to reassert itself if the medium-term upside is to continue to be given the benefit of the doubt.
Live cattle has led to the downside and encountered resistance in the region of the 200-day MA from mid-May. A sustained move back above $123 would be required to suggest a return to demand dominance beyond the short term.
Lean hogs broke successfully out of the seven-year range more than a year ago and has been consolidative mostly above $80 since. It rallied impressively from the intraweek lows and a sustained move below $80 would be required to question medium-term scope for additional higher to lateral ranging.