Hogs
Price action: Hog futures posted an impressive late-week rebound. The expiring July contract edged up 15 cents to $88.70, while most-active August surged $1.775 to $88.45. The closing quote marked a weekly decline of just 72.5 cents.
5-day outlook: The cash market remains generally stable, with the CME confirming Wednesday quote for the hog index down two cents to $88.65, with Thursday’s preliminary figure indicating another drop of 27 cents to $88.38. It’s interesting that July futures edged upward today, since that implies the index will rise a similar amount over the next two days (since the contract expires at noon Monday and will cash settle against the index next Wednesday, after Monday’s official quote is published). Meanwhile, the wholesale market is apparently repeating its recent pattern of late-week strength, as indicated by the midsession quote for pork cutout at $98.73, up $2.50 from Thursday’s improved quote. On the other hand, the market has also exhibited a tendency to give back those gains early the following week.
Hog and pork supplies remain plentiful and this week’s USDA slaughter estimate at 2.386 million head topped the year-ago total by 48,000 (2.1%), thereby matching the 2% year-to-year gains implied by the June Hogs & Pigs report. Conversely, seasonally low slaughter may limit downside price potential, as clearly suggested by today’s August futures close slightly above the July price.
30-day outlook: We hold a generally neutral bias about short-term prospects, thinking seasonally strong consumer demand for bacon at the height of BLT season (along with low early-summer slaughter) will tend to support the hog and pork complex. One could argue that the August futures quote implies greater strength through late July, since hog supplies and slaughter rates generally begin their seasonal second-half surge after the first week of August (thereby tending to mark the start of concurrent summer-fall price losses). We are guardedly optimistic on that score.
90-day outlook: The June USDA Hogs & Pigs report implied hog supplies will run about 1% over year-ago levels from late July through the end of the year. We have no evidence to contradict such a scenario, but would point out that hog supplies have regularly exceeded implied USDA production forecasts since early 2023. The gains have apparently reflected surprisingly large numbers of pigs saved per litter during that span. Still, there’s little reason to think the price outlook will prove particularly robust. And yet, October and December futures are trading at levels comparable to those seen at those times last year. We’re more inclined to skepticism on this point given our doubts about retailers lowering pork prices to consumers, which would likely be needed to provide the complex with the implied strength.
What to do: Get current with feed advice. Carry all production risk in the cash market for now.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all soymeal needs covered in the cash market through mid-August. You should have all corn-for-feed needs covered in the cash market through July.
Cattle
Price action: August live cattle futures rose 12 1/2 cents to $182.375 and nearer the session high. For the week, August live cattle lost $4.05. August feeder cattle futures gained $2.50 to $258.65 and nearer the session high. For the week, August feeders fell $2.825.
5-day outlook: The cattle futures market bulls stabilized their markets late this week, with short covering featured following recent steep losses. However, a deterioration in the cash cattle and fresh beef markets this week may find the cattle market bulls facing headwinds next week. Cash cattle trade late this week improved from earlier in the week, the five-area average now averaging $192.88, up from $188.36 on Thursday. However, that’s still well down from last week’s record-high average of $197.09. Today’s noon report showed wholesale box beef cutout values mixed, with Choice grade up 51 cents to $322.16, while Select declined 21 cents to $303.17, taking the Choice/Select spread to $18.99. Movement at midday was decent at 78 loads. World Weather Inc. today said high temperatures in the Plains states will persist in the coming days that will stress livestock. The forecast said hot temperatures in the northern Plains will last possibly until the end of July.
30-day outlook: Last year, cash cattle prices dropped three weeks in a row after peaking in June, then worked higher into August. This week’s good movement of boxed beef suggests consumer demand continues strong despite seasonals that suggest demand does taper off after the Fourth-of-July holiday. Feeder cattle market bulls are hoping feeder futures continue to perk up in the coming weeks due to the significant drop in corn and soybean meal prices the past couple weeks. The feeder index also leapt almost $3.00, to $261.53, Thursday, which offered considerable help to the bullish cause.
90-day outlook: The S&P 500 and the Nasdaq stock indexes this week hit record highs. The U.S. consumer price index report for June showed tame consumer inflation that fueled expectations the Federal Reserve will be able to lower U.S. interest rates this fall. These elements have consumer attitudes upbeat and should continue to support better demand for beef at the meat counter in the coming months.
What to do: Get current with feed advice. Carry all production risk in the cash market for now.
Hedgers: Get current with feed advice. Carry all production risk in the cash market for now.
Feed needs: You should have all soymeal needs covered in the cash market through mid-August. You should have all corn-for-feed needs covered in the cash market through July.