Hogs
Price action: Hog futures stabilized in the wake of recent losses. The nearby April contract rose $1.00 to $86.625, which represented a weekly slide of 72.5 cents. The deferred contracts posted modest losses.
5-day outlook: Stable cash prices are providing solid support for the April hog contract, particularly since it’s priced about $3.00 under the hog index. The CME confirmed Tuesday’s index quote at $89.77, up seven cents from Monday. Wednesday’s preliminary figure is still at $89.74, while Thursday’s data indicated it slipped another 19 cents to $89.55. The wholesale market is also performing well for this time of year. Pork cutout did set back significantly Thursday afternoon, but rebounded again this morning, with across-the-board gains in primal values boosting cutout $2.19 to $99.48. This implies robust demand, but as if often the case, the short-term production outlook is in question. After having fallen below year-ago levels for weeks, this week’s hog slaughter reached 2.515 million head, up 59,000 (2.4%) over year-ago. In normal circumstances the short-term outlook would look quite favorable. But, just as was the case this week, we should probably expect significant fluctuations as the tariff/trade wars continue.
30-day outlook: As pointed out previously, the March-through-early April period can be quite changeable from a historical perspective, with the date of Easter, consumer demand for hams and the onset of grilling season affecting the markets. The short-term outlook seems promising if pork doesn’t become a big feature of the ongoing trade disputes. This week’s year-to-year increase in hog slaughter raises questions about the spring supply outlook. We’ll learn more on that score when the USDA publishes its quarterly Hogs & Pigs report on March 27. Given the market’s history of surging pork demand as the grilling season gets underway, as well as the strong tendency toward seasonal supply reductions, we expect seasonal price strength, especially by mid-April.
90-day outlook: Consumer demand for pork surges in spring and early summer, with the onset of grilling season having consumer actively pursuing pork chops (loins), pulled pork (butts), ribs, ham steaks and sausage (trimmings). Bacon demand for BLTs also powers up as consumer gardens start yielding home grown tomatoes. In contrast, hog slaughter typically declines steadily to annual lows around Independence Day. Last year was an exception, but we expect grocers to continue actively featuring pork in the coming weeks, which should also facilitate the usual second-quarter hog rally. The trade/tariff situation will clearly be a wildcard capable of triggering big moves in either direction.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
Feed needs: You have all corn-for-feed needs covered in the cash market through March. You have all soymeal needs covered in the cash market through April.
Cattle
Price action: April live cattle futures rose $1.125 to $203.175, near the daily high and closed at a 2.5-month high close. For the week, April cattle gained $2.90. May feeder cattle futures gained $1.125 to $282.65, near the daily high and closed at a contract high close. On the week, May feeders rose $4.25.
5-day outlook: The technically bullish weekly high closes today in April live cattle and May feeders set the stage for follow-through chart-based buying early next week. However, both markets are also short-term overbought, technically, and due for routine downside price corrections soon.
Cash cattle negotiations remained very light as of midday Friday, with the average trading price this week at $200.00. With feedlots asking higher prices and packers unwilling to bid up for beef supplies given poor margins, this week’s negotiated cash cattle volume will likely turn out very light. The noon report today showed Choice-grade wholesale boxed beef value fell $1.82 to $317.87, while Select grade fell $1.15 to $306.32. Movement at midday was 58 loads. The Choice-Select spread is presently $11.55. Next Friday afternoon brings the monthly USDA Cattle on Feed report.
Cattle producers in the Plains states will closely monitor weather in the coming days. World Weather Inc. today said that in the Plains states today, “wildly swinging temperatures are stressful for livestock.” Extreme winds today and next Tuesday will also be a concern for livestock producers. In the northern Plains, a particularly strong area of low pressure will impact the region today into Saturday with snow and strong winds. Most of the snow will occur in a blizzard that is expected in western Minnesota and possibly eastern South Dakota. Wind speeds with the snow will gust as high as 50 to possibly 60 mph. The blizzard will cause notable travel delays and livestock stress. Another snow event is likely Tuesday, mainly in the southern half of the region.
30-day outlook: History suggests the cash cattle market tends to reach a seasonal peak in late March or in April. Slaughter levels typically rise from late-winter, through spring and into summer, which is a negative for cattle and beef prices. However, demand, particularly at the wholesale level, also increases around this time as grocers and consumers gear up for grilling season. With the overall cattle population at historically low levels, prospects for seasonal gains in cattle prices in the coming weeks are still in the cards. One worry is more active grocer retail price increases for beef, as seen in this week’s consumer price index report. The higher beef prices and stable to lower pork prices as seen in the CPI report may cut into consumer demand for beef in the coming weeks.
90-day outlook: Risk appetite in the general marketplace may play a key role in cattle futures price action in the coming few months, as the U.S. and its major trading countries are presently throwing out trade tariffs in tit-for-tat fashion. This has dented the U.S. stock market, which may translate into lower consumer confidence and in turn less demand for beef at the meat counter in the coming months.
What to do: Get current with feed coverage. Carry all production risk in the cash market for now.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: You have all corn-for-feed needs covered in the cash market through March. You have all soymeal needs covered in the cash market through April.