2008 New Years Report – Agricultural part II (meats)
It can not be said that the meats have been doing anything marvellous in 2007, as none of the products have been able to make any significant advance in their price. High prices in the grains could change that, with higher feeding cost. If breeders can’t break even due to feed cost, a cut in production can be expected. Usually meats react to higher feed prices some time after the increase of feed prices, as change in breeding takes time to materialise. The year 2008 could see some increases in the price of meat products.
Cattle, Feeder
Feeder cattle has since 2004, been trading in the higher price range of the last 25 years. Setting a long term resistance at around 117.5 cents and a support around 97 cents, the tunnel can trade at around 10,000 USD between swings. When looking at the monthly chart, these long term swings are quite regular in swinging from one end to the other, and being now close to the lower part of the trade range, a sizeable rise in price could be at hand. The year 2008 will most likely see higher prices in the first part of the year as prices bounce back up. The big question is what will happen when prices reach the upper limit of the trading range. Will it fall back again, or will it go right through and ride on the back of higher grain prices, towards new heights. What ever the outcome, a sizable profit of about 9 to 10 thousand USD per contract could be expected in the upswing. When looking at the timing, the move could start around the third week of January.
Cattle, Live
Live cattle has, like feeder cattle, been trading in the upper part of the price range for the last 25 years, being held back by a resistance at the 96.5 cents level. Different from the feeder cattle, live cattle has managed to break through these levels on two occasions, in late 2003 and beginning of 2007. Prices have not been able to maintain these heights for a long time, but on the other hand, the drops are getting smaller. As such the commodity has been narrowing the tunnel to the upside, contrary to the feeder cattle. From a short term point of view, a price reversal could be imminent, but from a long term stand point it’s difficult to set a date for a major upward move. Any push towards higher prices will most likely be supported by high corn prices.
Hogs, Frozen Bellies
Bellies started the year 2007 with an aggressive drive towards higher prices which lasted out January. After that the prices halted and later fell to new lows until it bounced back in August 2007. Since then prices have been in a holding pattern, not setting any firm direction. A possible reversal to the upside can be seen on the daily chart, as well as the weekly, with the monthly chart not showing any firm signs of a reversal in the near future. We could therefore see some higher prices emerging soon, though it’s not possible to say how long they will stay high.
Hogs, Lean
Lean hogs had, like the bellies, a good beginning in 2007 that lasted a short time. Followed by a big drop in prices, the hogs are now trading close to a support on the weekly and monthly charts. On the daily chart, there are indications that the price of hogs could start to rise in the coming days. But even though the rise could be substantial, it’s not certain that the hogs could be setting a lot of higher highs, when looking at long term prices. It all depends on the support that higher feed cost could give. If grains will continue to stay high, higher hog prices could be in the making.
