Hogs
Price action: Despite continued cash weakness, hog futures rose again Friday. Nearby October gained edged up 5 cents to $82.225. Today’s settlement price represented a weekly advance of $1.675.
5-day outlook: Seasonal pressure on cash hog prices continues, which is entirely understandable due to the usual late summer-fall surge in hog supplies. However, consumer demand for pork is holding up remarkably well, which has limited the August decline in cash hog and pork prices. The CME confirmed the latest hog index quote (for Wednesday) at $87.04, which marked a daily decline of 41 cents. USDA data indicates Thursday’s quote will fall another 57 cents to $86.47. In contrast, pork cutout rebounded from Thursday morning losses to end the day at $95.84, then rose another $1.52 to $97.41 at midsession today. Last week’s hog slaughter proved surprisingly small, but this week’s preliminary total reached 2.430 million head, marking a 43,000-head (1.8%) annual increase, thereby generally matching the annualized gains seen since early summer. We still harbor suspicions the hog and pork complex will remain generally stable again next week.
30-day outlook: It is common for hog and pork prices to perform poorly during September. However, there are occasional divergences from that pattern. We think that will be the case this year, amid a shift toward much more active pork features in grocery stores since Independence Day. Pork demand is proving quite robust this summer and seems likely to remain strong during September. As long as grocers don’t actively boost retail pork prices, as they did in fall 2022 and 2023, the cash and wholesale markets seem likely to stabilize and/or rise next month.
90-day outlook: When cash hog prices perform well during September that strength tends to last into mid-October, with seasonal pressure once again taking effect from that point. We see no reason to doubt the likely weakness to be seen during the fourth quarter, especially if the market holds up well through early autumn. Hog slaughter typically climbs to annual highs in mid-December and that’s likely to happen again this year. Consumer pork demand also tends to drop in the fourth quarter. The exception is the ham market, since it’s heavily featured as a holiday dinner entrée. The resulting strength can provide considerable support for hog and general pork values, but that hasn’t been especially evident in recent years.
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: Cattle and feeder futures bounced despite cash market weakness. August live cattle went off the board at $185.85, up 97.5 cents, at noon today. October live cattle rose 70 cents to $178.60, thereby marking a weekly rise of $2.90. October feeder futures advanced $1.075 to $237.75, which represented a weekly gain of $3.375.
5-day outlook: Cash cattle prices fell for the sixth straight week, with the four-day average for the five-market area dipping to $183.74 from last week’s average of $185.54. And this week’s big wholesale losses might easily be seen as presaging more of the same in early September. However, today’s strength in both wholesale and futures prices suggest traders are now anticipating a short-term rebound. That seems especially true when one considers the October futures close about $4.50 above the cash average. In the wake of the cash market drop, we expect producers will become even less amenable to lower packer bids than has been the case lately. A sustained wholesale bounce would probably prove supportive of cash and futures prices as well.
30-day outlook: The July Cold Storage data from the USDA indicated beef stockpiles remained comparatively small despite the cash and wholesale strength seen through early summer. We believe that indicates vigorous consumer demand, which in turn has been encouraged by grocers refraining from more aggressively increasing retail beef prices. We think they’ll begin ramping up their buying again next week as they start building inventories for planned beef features in early October. If so, that could also translate into stronger wholesale beef and cash cattle prices, which would mark a divergence from the 10-year average indicating modest seasonal pressure during September. Futures might easily rally in such circumstances as well.
90-day outlook: The cash cattle market has historically tended to advance during the October-November period despite the grocery industry’s strong preference for featuring turkeys during the run-up to Thanksgiving. We see little reason to expect a change from that cattle market pattern this fall, especially with the discounted live cattle futures price structure encouraging feedyard managers to market their cattle quickly (thereby reducing market-ready fed cattle supplies) and curb placements of replacement yearlings (and diminishing the numbers likely to be available down the road).
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.