Hogs
Price action: Hog futures proved surprisingly strong to end the week. The expiring July contract rose 12.5 cents to $89.575, while most-active August climbed $1.40 to $89.50. The closing quote represented a weekly gain of 17.5 cents.
5-day outlook: Thursday’s quarterly USDA Hogs & Pigs implied summer hog slaughter will average about 2% over year-ago levels, with fall supplies likely to run about 1% over last year. The former figure topped expectations by about 1%, so futures were expected to open and close poorly today. The fact that most contracts ended the day significantly higher seemingly marks a big win for industry bulls, especially since it suggests the nearby contracts have found a short-term bottom. The surprising strength probably reflected big wholesale gains posted this morning, with large ham and pork rib advances leading an across-the-board surge. Pork cutout leapt $4.93 to $99.83 as a result. On the other hand, pork prices have repeatedly posted big Friday gains in recent weeks, then given them back early the week following. But, this week’s slaughter total looks negative for Monday’s opening, since the indicated 92,000-head (4.0%) annual increase probably exceeded industry expectations. Obviously, next week’s market activity is likely to be subdued, especially with a large percentage of the working population likely to make it a four-day holiday weekend.
30-day outlook: As mentioned above, the hog report stated pig numbers in the two heaviest categories as of June 1 about 2% over year-ago levels. Slaughter totals since early June have more than confirmed the implied supply increase and we have little reason to doubt more of the same during July. However, underlying demand for hogs and pork remains the industry’s big problem. Unless grocers shift gears rather dramatically and become much more aggressive in featuring pork through the balance of the summer, there is little reason for optimism about the hog price outlook next month. Again, bulls must rely upon improved consumer demand, and likely retail price cuts from grocers.
90-day outlook: The hog report implied hog supplies will average about 1% over year-ago levels through the balance of 2024. Summer farrowing intentions fell 3% below year-ago levels, but the impressive increases in litter sizes posted over the past 18 months suggest reductions in market hog numbers will not occur. The cyclical increases in the pig population seem likely to amplify the usual seasonal surge in hog supplies during the second half of the year. Conversely, the projected price losses indicated by the fall-winter contracts are actually rather small when compared to the cash market quotes seen during the fall and winter of 2023-24. Traders seemingly expect improved demand from consumers and export customers. We don’t see that happening without grocers becoming more active in featuring pork. That would mark a significant contrast to the big retail price increases they imposed during the fall months of 2022 and 2023.
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 corn-for-feed and soymeal needs covered in the cash market through July.
Cattle
Price action: August live cattle closed down $1.025 at $184.425 and nearer the session low. For the week, August live cattle gained $2.275. August feeder cattle futures lost $1.35 to $259.30, nearer the session low and on the week moved up 92 1/2 cents.
5-day outlook: The cattle futures markets today saw some profit taking pressure from recent gains that on Thursday pushed August live cattle to a nine-month high. As of this writing there had not been active cash cattle trading develop yet this week. Many traders were expecting higher cash trade again this week. Packer interest increased Thursday, suggesting higher cash prices. So far, just limited cash trade has occurred at steady/firmer levels. The noon report today showed Choice-grade boxed beef cutout value up another $2.40 to $325.73, a fresh 2024 high, while Select grade was up $2.11 to $304.81, taking the Choice/Select spread to $20.92. Movement at midday was 56 loads.
30-day outlook: The cattle futures markets have been supported recently by record high cash cattle prices and good demand for beef. However, there are now some concerns that demand may taper off in the coming weeks and wholesale prices will slide after the Fourth of July holiday period, as retailers have likely secured all their beef product needs for next week.
90-day outlook: Reduced beef packer production may continue to support elevated wholesale beef prices. Today’s midsession quote for Choice beef cutout high is around $18.00 below last year’s peak. The summer beef demand outlook may depend on retailers’ willingness to continue making beef a loss-leader feature. If such continues to be the case it could mean cattle prices will be sustained at elevated levels in the next few months. However, that would be a divergence from the historical tendency for a summer dip in cash cattle prices.
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 corn-for-feed and soymeal needs covered in the cash market through July.