With a cottonmouth wrapped around one leg, he wrestled a cougar and a feral pig. When other guys experience paralysis, he’ll save the day with insightful analysis, that’s Dan Vaught.
Today marks the end of an era for one of Pro Farmer’s long standing analysts. We want to wish a happy retirement to Dan Vaught. His insight, wit and analysis will be greatly missed
Hogs
Price action: Despite their comparative strength versus many other commodity markets, livestock futures took a big hit Friday as traders tried to interpret the impact of President Trump’s “Liberation Day” tariffs. Expiring April hog futures were an exception, settling unchanged at $87.375 as traders look forward to its April 14 expiration. Most-active June hogs plunged $4.00 to $91.55 to end the week; that marked a weekly drop of $4.225.
5-day outlook: The domestic hog situation still seems supportive, especially with the traditional spring rally likely looming in the coming weeks. That was made apparent by the latest cash and wholesale quotes, which saw the preliminary figure for Thursday’s hog index quote falling just 36 cents to $88.36. In contrast, after having declined over the previous week, pork cutout rebounded moderately Thursday afternoon, then jumped $4.08 to $98.42 this morning. As is usually the case on Friday, the surge was powered by a leap in pork belly values. Also, as is often the case, the market will likely give back much of that gain in afternoon trading.
This week’s hog slaughter again looked comparatively large, topping the comparable year-ago figure by 112,000 head (4.6%), but as noted last week this week’s numbers are being compared to the week after Easter last year, when holiday-related closings depressed the slaughter total. This phenomenon will be reversed later this month. We think fundamentals remain supportive of the short-term outlook, but the extreme uncertainty surrounding the tariff situation could send the markets in either direction.
30-day outlook: Cash hog and wholesale pork values routinely rally during spring as seasonally declining hog supplies are met by surging demand powered by grilling season. We think current conditions are conducive to an April advance, but also think packers have strong control over contracted and formula supplies, which greatly limited the rally last year. On the other hand, grocers maintained retail pork prices at elevated levels last spring, which hurt the market. That doesn’t seem to be the case this year. Again, current conditions seem conducive to late-April strength, but the tariff/trade situation threatens to throw fundamental analysis out the window.
90-day outlook: Hog slaughter typically falls to annual lows around Independence Day, which accounts for a big portion of the price strength seen during the second quarter. July 4 also tends to mark the last hurrah for the spring grilling season, with buying surging around Memorial Day, Father’s Day and Independence Day as the main grilling holidays. Again, history suggests the market will peak in mid-to-late June. But last year’s divergent example, as well as the uncertainty and volatility surrounding the tariff situation promise to make such patterns at least temporarily obsolete. On the other hand, summer futures are trading at very modest premiums for this time of year, especially after today’s breakdown, so they may face limited downside risk.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
Feed needs: You have all corn-for-feed needs covered in the cash market through April. You have all soymeal needs covered in the cash market through May.
Cattle
Price action: June live cattle fell the daily trading limit of $6.50 to $198.20 and hit a three-week low. For the week, June cattle lost $6.65. May feeder cattle fell the daily limit of $8.25 to $274.875 and hit a four-week low. On the week, May feeders fell $10.30.
5-day outlook: The cattle futures markets, like most of the rest of the raw commodity sector, were punished late this week by extreme risk aversion that sent most commodity bulls running for cover. Limit-down and technically bearish weekly low closes in nearby live and feeder cattle futures markets hints there will be follow-through selling pressure on Monday. If the U.S. stock markets continue selling off next week, the cattle futures markets are not likely to get any significant upside price traction. On the positive side, today’s U.S. jobs report was stronger than expected, but did little to ease the pain of keen global trade/economic uncertainty.
30-day outlook: Cash cattle market fundamentals remain solid, which suggests the bull market in cattle futures can be reignited once the stock and financial markets settle down. Cash cattle trading so far this week sees steer and heifer prices fetching just above $212.00. Earlier this week light trading did occur at around $210.00. The noon report today showed wholesale boxed beef values firmer, with Choice up $1.04 to $339.41, while Select gained 51 cents to $318.35. Movement at midday was 48 loads. The Choice-Select spread is presently at $21.06. Grilling season being right around the corner also augurs well for good consumer demand for beef at the meat counter.
90-day outlook: The fundamental outlook for the cattle markets remains positive in the coming months. The late-March USDA cattle-on-feed report showed a U.S. cattle inventory that was 2 percent below last year at the same time. Also, cattle placements were down 18 percent from the same time the year prior. The latest monthly USDA cold storage report also showed bullish beef stocks data. However, the macro-economic picture for the U.S. will have to improve from the present dour view, which we believe it will, for the cattle and beef markets prices to remain historically elevated.
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 April. You have all soymeal needs covered in the cash market through May.