Hogs
Price action: Expiring December hog futures climbed 87.5 cents to $83.30 Friday. Most-active February futures advanced 97.5 cents to $87.325. That represented a weekly rise of $1.00.
5-day outlook: The hog situation seems likely to remain surprisingly stable over the next week, especially when viewed in light of Friday’s sizable December futures’ gain, since that likely reflects the best opinion of industry insiders concerning price fluctuations during the run-up to next Friday’s (12/13) contract expiration. Today’s rise implies the hog index, which is officially stated at $83.93 for Wednesday and USDA data indicating Thursday’s quote will drop another 20 cents to $83.73 when published Monday, will decline about another 60 cents over the five-day period. The industry is apparently dealing with persistently vigorous consumer demand, as well as comparatively tight (and light) hog supplies. This week’s preliminary hog slaughter total confirmed the former point, with the 2.602 million head total coming in 66,000 head (-2.5%) below year-ago. Indeed, this is the largest weekly (non-holiday) year-to-year reduction seen this fall.
30-day outlook: History suggests downward pressure on hog and pork prices will intensify through the holiday season, with hog supplies at or near annual highs meeting significantly diminished pork demand from grocers after they’ve completed their ham buying for Christmas (likely by mid-to-late next week). We see little reason to think the market will avoid at least a temporary dip to a fresh second-half low between Christmas and New Years. We’ll also see the USDA release its quarterly Hogs & Pigs report on Monday, December 23. Recent reports have indicated 1%-2% annual increases in hog numbers and slaughter, so a similar result seems likely. But the sustained decreases seen this fall, especially when compared to the big increases projected by the September report raise real questions about early 2025 supplies. We also think having Christmas and New Years come on Wednesday decreases the chances of big backlog of hogs as was the case the past two-three years. Thus, we tend to expect cash prices to turn seasonally higher in early January.
90-day outlook: As pointed out in the past, it’s most common for cash hog prices to rise moderately from holiday lows into mid-to-late February, with improved grocer and consumer demand for the various cuts meeting seasonally diminishing hog supplies. That’s historically followed by a very muddled outlook for late winter and early spring. Our first inclination is to anticipate seasonal weakness during that period, especially if hog supplies once again begin running above year-prior levels. The fact that Easter will come very late, on April 20, also suggests weakness, since that will tend to delay the unofficial start to the grilling season.
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: 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 futures fell 15 cents to $186.175, near the session low and hit a three-week low. For the week, February cattle fell $2.45. January feeder cattle futures gained 90 cents to $255.825 and near mid-range. On the week, January feeders fell $3.65.
5-day outlook: The cattle futures markets this week fell victim to some profit-taking pressure from the speculators, as the near-term technical postures have eroded, especially in live cattle. The speculators will likely continue to lean on futures prices early next week, which would further damage the near-term technical outlook.
However, selling interest may be limited by improving cash cattle market fundamentals late this week. Cash cattle trading broke loose in the northern market Thursday, with Iowa-southern Minnesota trading actively at $190.48 and Nebraska at $190.23. There was light trading in Kansas and Oklahoma-Texas at $190.00 and $189.76, respectively. The 5-area average was $190.38. Most feedlots were still holding out for better bids. Meantime, today’s noon report showed higher wholesale beef values, with Choice up $4.08 to $311.92, while Select gained 56 cents to $277.66. Movement at midday was good at 89 loads. The Choice-Select spread widened out to a very-wide $34.26.
30-day outlook: The U.S. economy added 227,000 jobs in November, which was modestly higher than expected but not strong enough to likely dissuade the Federal Reserve from making another cut in its main interest rate later this month. The unemployment rate rose to 4.2%, as expected. A booming U.S. stock market saw the major stock indexes hit record highs this week. These elements are making for upbeat consumer confidence, which means better demand for beef at the meat counter in the coming weeks.
90-day outlook: The autumn rise in steer weights stalled during November, which
suggests cattle producers are still marketing fed cattle in a timely fashion. The Choice/Select beef spread remains seasonally wide, suggesting a continued shortage of high-quality animals in feedlots. With consumer demand for beef remaining strong, the winter/spring cattle outlook looks promising.
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.