Hogs
Price action: Concerns about Mexican demand likely undercut hog futures Friday. Expiring February futures slid 20 cents to $84.175, while most-active April futures fell $1.575 to $90.35. The latter marked a weekly rise of $2.15.
5-day outlook: The cash hog and wholesale pork markets sustained their seasonal advance this week, with the CME confirming Tuesday’s hog index quote at $82.59 today, which marked a 48-cent gain. We still have Wednesday’s preliminary figure at $83.06, up another 47 cents, and now calculate Thursday’s quote at $83.48, up another 42 cents. Just as important was today’s followthrough rise in pork values, which jumped $2.69 to $94.62 at noon today. This week’s hog slaughter is estimated at 2.574 million head, representing a 128,000 head (4.5%) annual drop. When combined with last week’s big year-to-year reduction, these numbers go far toward confirming our suspicions that hog supplies are tighter than the USDA projected in December. Thus, we expect the seasonal advance to continue next week.
30-day outlook: Indeed, we expect the ongoing rally to persist through much of February and possibly into March. A portion of that optimism is based upon the market’s traditional pattern of rallying into the mid-to-late February period from annual lows in late December or early January. We also think the belated arrival of Ash Wednesday this year on March 5 and Easter on April 20 will keep grocers and processors buying hams destined for Easter dinner entrees through early March. The previously discussed indications of surprisingly low hog supplies suggest underlying strength will prove persistent.
90-day outlook: The flipside of the Easter/ham coin is the potential for a belated start to the spring grilling season until after Lent is over. Much will depend upon the aggressiveness with which grocers plan to feature the various pork cuts during spring, which in turn may depend upon developments in the cattle and beef complex. If the cattle market posts a major peak in the days just ahead, which had recently seemed likely, grocers may decide to actively pass on to consumers their increased costs for wholesale beef. That could create substitution demand for pork. Conversely, a later cattle peak could encourage grocers to continue actively featuring beef, thereby potentially leaving pork lagging. We would also point out that ending-2024 pork belly stocks were relatively low; that could bode well for belly and hog values during the run-up to the summer BLT season.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
Feed needs: You should have all soymeal needs covered in the cash market through the end of February. You are hand-to-mouth on corn-for-feed needs.
Cattle
Price action: Bears proved unable to sustain downward pressure on cattle and feeder futures Friday. Nearby February live cattle gained 12.5 cents to $204.60, while most-active April rose 80 cents to $202.30. That latter marked a weekly decline of 72.5 cents. Nearby March feeder futures surged $2.525 to $275.725, which marked a weekly slide of 85 cents.
5-day outlook: It looks as if cash cattle prices will again set a fresh all-time high this week, since Thursday’s cash trading was relatively active and averaged $209.46, compared to last week’s full average at $209.19. Given the huge gains posted over the previous two weeks, this implies the market is losing its upward momentum. That goes for wholesale beef as well. Choice beef ended last week over $333.00 but slid to $327.56 at noon today. Still, this remains very high by historical standards, especially for this time of year. The fact that bears couldn’t sustain the previous two-day futures breakdown after today’s early losses strongly suggests the cattle and beef complex has not peaked. Still, given this week’s futures developments, we’re inclined to expect further slippage next week. The USDA will release its annual Cattle inventory report at 2:00 CST this afternoon.
It probably won’t have a big impact on futures next Monday, since most of the information released is longer term in nature. However, if it holds significant surprises about likely first-half feeder cattle supplies, that could affect the markets. See “Evening Report” for results.
30-day outlook: This week’s Monday-Thursday futures price action strongly suggested the complex might be peaking. That might be the case, but today’s cash news, as well as the futures rebound to end the week, could be seen as indicating the anticipated cyclical peak has not been reached. We harbor suspicions the cash market will slip over the next few weeks, which could weigh on cattle and feeder futures as well. But given this week’s late market action, as well as the market’s history of seasonal strength in the March-April period, as well as its history of early-summer strength over the past few years, we are unwilling to call a cyclical top at this time.
90-day outlook: Cash cattle prices historically tend to be quite strong during the March-April period. This reflects the seasonal tendency for cattle slaughter to reach annual lows in the late-February through March period. Grilling season demand from grocers and consumers also tends to begin its annual surge during April, which is likely a big reason prices tend to remain strong despite the usual late-winter upturn in cattle slaughter and beef production. If grocers continue holding the line on steak prices as they did through much of 2024, that could bode well for demand and the spring price outlook. On the other hand, if the recent cash and wholesale market advance causes them to begin boosting prices to consumers more aggressively, the resulting reduction in demand could weigh heavily on the market during the second quarter.
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 should have all soymeal needs covered in the cash market through the end of February. You are hand-to-mouth on corn-for-feed needs.