Hogs
Price action: Hog futures rebounded from big early losses. Nearby February ended the day having slipped 37.5 cents to $80.775. That represented a weekly drop of $3.375.
5-day outlook: The hog and pork complex remained seasonally weak through Friday, with anticipation of a big drop in the CME hog index apparently undercutting futures. The CME confirmed Tuesday’s quote for the index at $83.99, down 28 cents from Monday, but today’s USDA report indicates it will dive 87 cents to $83.12 when it’s officially published next Monday. Tumbling pork cutout values have played a role in the cash losses, with primal ham values falling about $3.50 again Thursday; that dragged pork cutout lower as well. Ham values did firm Friday morning, but that doesn’t guarantee a short-term bottom in cash and wholesale values. This week’s preliminary slaughter total suffered another big holiday-related drop, thereby confusing the issue of short-term hog supplies. That will be the case again next week, since New Year’s Day 2024 came on the comparable Monday. We still expect comparative reductions in hog numbers, along with robust consumer demand, to renew support for the complex next week.
30-day outlook: The hog market has traditionally turned higher from year-end holiday lows soon thereafter but has also demonstrated surprisingly sustained weakness in some recent years. February futures strongly imply the latter will happen in the coming days and weeks, since it’s still priced over $2.00 below the latest estimate for the hog index. We are more optimistic, thinking the onset of the seasonal downtrend in hog supplies (that lasts into early summer) and persistently strong consumer demand will power something akin to the traditional cash rebound into mid-to-late February. Look for the ham market to exhibit renewed strength as the industry starts building inventories for planned Easter dinner entrees.
90-day outlook: We view the quarterly outlook as heavily dependent upon two factors. We expect consumer pork demand to remain robust as long as grocers don’t significantly increase retail pork prices. But, if they do boost them, the market action of the past few years suggests the cash and wholesale markets will prove surprisingly vulnerable to larger losses. The second factor is hog supplies. The USDA’s Dec. 23 Hogs & Pigs report implied hog numbers will continue running below year-ago levels through January, then run modestly above year-ago levels through the balance of winter and spring. Increased hog numbers and pork production would probably tend to limit market gains if consumer demand remains strong. Conversely, an environment of annually rising supplies and significantly increased retail costs could depress the whole complex.
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 futures rose 45 cents to $194.05, nearer the daily low after hitting a 14-month high early on. For the week, February cattle rose $3.40. March feeder cattle futures lost $2.025 to $264.175 and nearer the daily low after hitting a contract high early on. On the week, March feeders rose $3.625.
5-day outlook: After surging to fresh for-the-move highs in early trading today, the live and feeder cattle futures bulls appeared to have run out of gas by producing low-range closes. The futures bulls may well be exhausted after recent solid price gains. While normal, corrective price pullbacks are due, cattle traders know the futures markets’ bull runs are very mature and may be nearing an end sooner rather than later. Still, cash cattle market fundamentals remain friendly. Cash cattle trading turned active Thursday with prices generally $2 to $4 higher than a week ago, at around $197.00. That suggests the cash market may challenge the all-time high average price of $197.09 posted early July of last year. The noon report today showed boxed beef values rose, with Choice grade up $1.46 to $324.94, while Select grade gained $1.83 to $296.06. Movement at midday totaled was decent at 84 loads. World Weather Inc. today said a significant winter storm will impact portions of the Plains states Saturday into Sunday. “Wintry precipitation and arctic air will lead to livestock stress,” said the forecaster.
30-day outlook: Market-ready cattle supplies have been tight and are likely to remain that way during the first quarter of 2025, seasonal factors suggest. That could prove especially true if the winter storm proves severe or is followed closely by others. Consumer demand for beef at the meat counter also remains good. These elements suggest any downside corrections in cattle prices in the coming weeks may be brief and not deep.
90-day outlook: Macro-economic fundamentals will also likely favor the cattle market bulls in the coming months. The U.S. stock indexes recently hit record highs and are presently hovering not far below them. Recent data continues to show a solid U.S. economy, but the Fed will still likely make at least one interest rate cut in 2025. The prospect of lower U.S. taxes with the new presidential administration is also a consumer confidence booster. All of the above suggest continued stronger demand for beef at the meat counter in the coming months. Look for seasonally reduced fed cattle supplies as well, with the cash market traditionally reaching a seasonal high in late March or April.
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.