Hogs
Price action: Pork weakness undercut hog futures Friday, with the October contract falling $1.425 to $75.075. That represented a weekly rise of $1.10.
5-day outlook: Anticipation of seasonal pressure on hog and pork prices apparently weighed heavily upon hog futures again Friday, with the size of the losses likely reflecting Thursday afternoon and Friday morning wholesale losses. Pork cutout had leapt over $4.00 to $103.61 at midsession Thursday, but set back below $100.00 at the close. It slid another 95 cents to $98.92 at noon today. Bears are also expecting bigger hog supplies and pork production during the next two months. This week’s slaughter total, at 2.512 million head represented an 81,000 head (3.3%) annual increase, which exceeded the June Hogs & Pigs report’s implication of approximate 1% second-half increases. That probably spurred Friday selling as well. Nearby October futures will likely test pivotal support at the contract’s 40-day moving average around $74.40 Monday, with the results of that test likely setting the tone for the week’s trading.
30-day outlook: Hog supplies and slaughter will almost surely surge over the next two weeks, dip during the week of Labor Day, then surge even higher through late September and early October. Consumer demand for pork also tends to sag on a seasonal basis, with wholesale demand for hams actually tending to rise as entities up and down the marketing chain gear up for ham features during the holiday season. However, we suspect the improved packer attitudes and actions seen driving the recent cash and futures market rebound will provide surprisingly strong support for cash and wholesale prices through early fall, which might easily limit cash market losses and pull heavily discounted futures upward.
90-day outlook: Long-term averages suggest weekly hog slaughter will hit an intermediate seasonal peak in mid-October, move generally sideways into early December, then climb to an annual high just before Christmas. The fact that hog and pork prices often prove quite weak during that flat production period likely reflects seasonally weak consumer demand as much as excessive supplies. Again, if we’re correct in thinking recent events imply pork demand has improved, prices across the hog and pork complex may prove stronger than is currently anticipated.
What to do: Get current with feed advice. Carry all production risk in the cash market for now.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all corn-for-feed and soymeal needs covered in the cash market through August.
Cattle
Price action: October live cattle futures fell $2.45 to $178.30 and nearer the session low. For the week, October cattle lost $2.85. October feeder cattle futures dropped $4.95 to $235.95, nearer the session low and hit a contract low today. On the week, October feeders lost $3.825.
5-day outlook: Today’s technically bearish weekly low closes in October live and feeder cattle futures set the stage for follow-through price pressure from chart-based speculators early next week. Cash cattle trade broke loose in the northern market Thursday. Nebraska saw trading of about 2,500 head at $190.00, while Iowa-southern Minnesota traded about 2,400 head averaging $190.19. That’s down about $2.00 from last week’s Monday-through-Thursday trade, while Nebraska prices were down about $3.00 from the same period last week. Many feedlots were holding out for at least steady cash bids. Beef packer margins are in the red, which is limiting packer interest in paying up for supplies. Today’s noon report showed wholesale beef values rose, with Choice-grade up 59 cents to $317.53, while Select grade increased $1.05 to $303.08. Movement at midday was decent at 78 loads.
30-day outlook: Despite a historically weaker beef demand period versus earlier in the summer, consumers have remained active buyers of beef at the meat counter. Such is occurring due in part to steak prices rising only 2.1% from last year at the same time. Better retailer buying for Labor Day features and possibly beyond is likely to keep the beef market supported in the coming weeks, which may put in a price bottom in the cattle market sooner.
90-day outlook: The cattle markets got some good news this week in the form of macro-economic fundamentals. U.S. retail sales rose a much-stronger-than-expected 1.0% in July from June. Also, Thursday’s weekly jobless claims report showed less filings for unemployment than expected. This week’s economic data put the general marketplace in a much better mood, as evidenced by strong rallies in the U.S. stock indexes that have taken back all of the steep losses seen in early August. Upbeat consumer attitudes heading into the fall suggest better demand for beef at the meat counter in the coming months.
What to do: Get current with feed advice. Carry all production risk in the cash market for now.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: You should have all corn-for-feed and soymeal needs covered in the cash market through August.