Commodities - The four hoofed kind

I have started pruning my agriculture future positions and started to move to the other soft commodities, cattle and pork bellies (my personal futures account not my fund). It is the next natural iteration of the commodity bull market and what you saw in the 70s and 80s. Last week I sold out of half my rice position and a two months ago I bought the first cattle future I have ever owned in my life.

The meats have not kept up at all with price appreciation. If you have been in the meats industry it has just been horrid. The last few months have been especially bad as the large meat processors have been slaughtering cattle as fast as possible so as not to have to feed them having the side affect of keeping overall prices down. This is quickly dwindling supply. If you don't have a futures account the way to play it is by buying the etf COW. It is 68% live cattle 32% lean hog. One stock I have thought about is Tyson. They are the largest chicken producers who have just gotten slaughtered with feed prices moving up but chicken prices are finally starting to move up and Tyson appears to be the cheapest of the bunch. There is a debt issue which makes me nervous.

Below is a great summary of the little tidbits I have been picking up over the last few months. Nothing new if you have been following the story but a great recap if you haven't.

http://www.thestockadvisors.com/content/view/2095/9/

"With virtually all commodities soaring over the last several months, the meats have been a disappointment - until about ten days ago. I think we finally broke-out.

"Live cattle and lean hogs have been poor inflation-adjusted investments or speculations since the bull market in raw materials was set afire in 2002.

"Over the last six years, live cattle and lean hogs have gained just under 30% in nominal terms, or up barely 4% adjusted for inflation. That pales compared to the huge gains logged by the base metals, precious metals, the grains and other commodities.

On the increasing slaughter rate

According to the USDA, the weekly slaughter rate of hogs was up 7% in March from 12 months earlier.

"Farmers are culling more hogs and live cattle because input costs are threatening not only their margins but their operational viability. It's no understatement that feeder costs are literally skyrocketing as grain prices have tripled since 2006. So for livestock producers, it's either downsize or go out of business.