Hogs
Price action: Hog futures finished the week on a strong note, with the nearby February contract leading the way higher. It jumped $2.30 to end the week at $85.925. That represented a weekly rise of 32.5 cents.
5-day outlook: The cash hog and wholesale pork markets sustained their remarkable strength through Friday morning. The CME confirmed Wednesday’s quote for the CME lean hog index up 5 cents to $84.21. Moreover, Thursday’s USDA data indicates it will rise another 14 cents to $84.35 when published next Monday. Even more impressive was pork cutout jumping another $2.15 to $98.30 at midsession today. As expected, ham prices fell rather sharply in likely response to diving grocery industry demand after they completed their holiday season needs earlier in the week. But strong gains by most other cuts, particularly a big jump in pork belly values, easily offset the ham losses. Traders have likely been anticipating this week’s sizeable year-to-year rise in hog slaughter (due to Christmas-related cutbacks just before Monday, Dec. 25 last year). This week’s preliminary total topped the year-ago figure by 152,000 head (6.3%), but that essentially offset the 5% annual drop seen last week.
Traders may also have been reacting to published pre-report estimates for Monday’s release of the USDA’s quarterly Hogs & Pigs report. Those indicated the Dec. 1 U.S. hog population is likely to be virtually unchanged from year-ago levels, with the weight breakdown of market hogs implying continued shortfalls in hog supplies through January. The estimates imply likely supply increases through the February-June period.
30-day outlook: History suggests the hog and pork complex will prove quite weak over the next 2-3 weeks. This reflects the usual seasonal pattern of hog supplies near their highest levels of the year, whereas packer operation schedules are truncated for 2-3 weeks around Christmas and New Years. The ham market is usually quite weak as well, since the industry has routinely gathered all its foreseeable needs in the wake of the holiday season. Anticipation of that weakness has kept the nearby February futures contract trading below cash recently, implying a sizeable holiday drop followed by the traditional early-winter rally into February, or persistently flat-to-weak cash prices during that time. This week’s late action suggests the market will not prove very weak in the short term, and possibly prove even stronger in the new year.
90-day outlook: The 90-day outlook could be greatly affected by Monday’s Hogs & Pigs report, especially if the anticipated spring increase in hog supplies doesn’t materialize. If hog slaughter continues running below comparable year-ago levels through the first half of 2025, that suggests the usual spring rally could be amplified. Consumer demand will obviously be another important factor. That has proven surprisingly strong during the second half of 2024 and this week’s action suggests that will continue into 2025. Key will be the aggressiveness with which grocers price pork to consumers. Persistently flat-to-lower retail prices will probably power vigorous demand, but a sizeable boost to those costs could stifle consumer demand and undercut the hog and pork complex rather badly.
What to do: Get current with feed coverage.
Hedgers: You have 50% of first-quarter production hedged in February $84.00 puts at $3.35.
Feed needs: You have all corn-for-feed needs covered in the cash market through the end of December. You have all soymeal needs in the cash market through the third week of January.
Cattle
Price action: February live cattle rose $1.85 to $188.40, near the daily high but prices on the week were down $3.625. January feeder cattle futures gained $1.125 to $255.60, nearer the daily high and for the week lost $2.05.
5-day outlook: Price action in the cattle futures markets next week will be influenced by this afternoon’s USDA’s monthly cattle-on-feed report, expected to show large feedlot (1,000-plus head) inventories down 0.3% from year-ago as of Dec. 1. The report is expected to show a 5.1% decrease in placements last month. Marketings are expected down 1.8% from November of 2023. See Evening Report for results. The U.S. ban on Mexican cattle imports went into effect Nov. 22, so this month’s report won’t fully reflect that development. Cash cattle trade so far this week has been steady to $2.00 higher. Trading was again active in the north Thursday, with Nebraska trading averaging $194.91 and Iowa-southern Minnesota at $195.27. Much lighter trading took place in the southern Plains, as both Texas-Oklahoma and Kansas trading averaged $191.00. Today’s noon report showed Choice-grade boxed beef cutout value fell $4.42 to $316.27, while Select-grade was down 55 cents to $283.56, taking the Choice/Select spread to $32.71. Movement at midday was decent at 75 loads.
30-day outlook: The macro-economic picture for the cattle markets dimmed just a bit this week when the Federal Reserve made a surprising bearish pivot, including suggesting the Fed will only make two quarter-point cuts in the Fed funds rate next year. That spooked the stock market and sent U.S. Treasury yields higher. If the stock market remains wobbly and bond yields continue to rise in the coming weeks, such is likely to sap consumer confidence, which would likely hurt demand for beef at the meat counter.
90-day outlook: On the positive side, the cattle and beef industry is still seeing a cyclical cattle supply shortage despite higher weights. The current tightness is highlighted by Choice-grade cutout values near a record high for this time of year. Cyclical and seasonal factors suggest cash cattle prices may set records in early 2025. However, discounts built into nearby futures suggests futures traders are more pessimistic.
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 the end of December. You have all soymeal needs in the cash market through the third week of January.