Hogs
Price action: February lean hog futures fell a nickel to $84.14, which marked a weekly loss of $1.775.
5-day outlook: Lean hog futures traded with a conflicted tone most of this week, trading largely sideways with little conviction on low volume. Some of that lack of conviction is likely due to choppy trade in the cash market. The CME lean hog index is up another 35 cents to $85.10 as of Dec. 23, the sixth consecutive daily gain. One would think that would spur strength in futures, but traders have been slow to push prices higher. Their hesitation was justified as the preliminary calculation puts the cash index down 25 cents to $84.85 when it is released on Monday. The lack of direction in the cash market is unlikely to spur much momentum for bulls or bears in futures in the coming week, leading to what is likely to be another slow, sideways week of trade.
30-day outlook: Recent strength in the cash market has suggested a potential earlier seasonal bottom than what has been the case the past couple of years. Traders are hesitant to believe a low is in place, as February futures continue to trade essentially par with the CME lean hog index. Pork cutout on the other hand has shown impressive strength despite pork production likely posting a seasonal peak. Pork cutout was up $1.56 to $97.25 at midsession as strength in bellies and hams offset steep losses in picnics, though movement was relatively light. Strength in cutout has helped support cash prices recently but seasonally waning demand as winter drags on could hamper strength in the medium term.
90-day outlook: Monday’s Hogs & Pigs Report showed a bigger pig crop than expected alongside more hogs than expected as of Dec. 1. Traders were anticipating relatively tighter supplies given the strength seen in the cash market over the course of the fourth quarter. Given the hog population was bigger than expected, it is more a testament to impressive demand over the fourth quarter rather than tighter supplies. That signifies a significant shift in demand from beef to pork from consumers. If that shift in demand is sustained over the coming quarter, strength could persist in hog futures, though that could largely be influenced by grocer pricing.
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 55 cents to $190.65, near the daily high and on the week up $2.25. January feeder cattle futures gained $2.075 to $261.375, near the daily high and for the week up $5.775.
5-day outlook: The ability of live and feeder cattle futures to extend Thursday’s solid gains to end the trading week, including technically bullish weekly high closes, sets the stage for follow-through chart-based buying interest early next week. The late-week gains in cattle futures and the solid rise in boxed beef values suggest steady-at-worst cash cattle prices for this week’s trade. However, packers may not actively bid for cattle supplies due to another holiday-shortened slaughter schedule next week and still-negative packer margins. USDA today reported U.S. beef sales of 1,100 MT for 2024, down 85% from the previous week and 81% from the four-week average.
30-day outlook: The noon report today showed Choice grade boxed beef cutout value up 95 cents to $321.34 and Select grade up $3.60 to $292.37. That narrowed the Choice-Select spread to a recent low but still seasonally high $28.97, suggesting there are still tight supplies of quality animals in feedlots at present. The cattle industry is still seeing a cyclical cattle supply shortage despite higher weights—evidenced by the wide Choice-Select boxed beef spread at present. Cyclical and seasonal factors suggest cash cattle prices may continue to trend up in early 2025.
90-day outlook: U.S. stock indexes near their recent record highs, still relatively tame inflation and gasoline prices at the pump that are not unbearable point to continued good U.S. consumer confidence in the months ahead. The new Trump administration has also promised lower taxes. These elements point to continued stronger demand for beef products at the meat counter in the coming months, or longer.
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.