Hogs
Price action: Hog futures continued sliding Friday despite a big rebound in pork cutout. December hogs fell 60 cents to $79.50. The closing quote represented a weekly decline of 92.5 cents.
5-day outlook: Expectations for short-term weakness weighed on hog futures again Friday, with traders clearly expecting more of the same through the next few weeks. That is, Thursday’s hog index will likely be quoted at $89.27, when it’s officially quoted next Monday, down 51 cents from Wednesday’s official figure at $89.78. We’re not convinced of the severity of the drop, especially after pork cutout reversed Thursday’s big pork belly-driven drop this morning. It leapt $4.45 to $98.52, although the wholesale market has shown a consistent habit of reversing big Friday morning gains in the days soon thereafter. Still, we think consumer demand remains relatively strong, whereas hog slaughter is still running well-below USDA-based expectations. This week’s preliminary slaughter total at 2.633 million head fell 14,000 (0.5%) head below the year-ago figure, marking 7 of the past 9 weeks in which slaughter has fallen short of year-ago levels. Still, sustained seasonal weakness seems likely.
30-day outlook: Hog traders continue expecting a substantial seasonal breakdown over the following 4-6 weeks, as indicated by the discounts built into December and February futures. Those respective contracts ended today about $10.00 and $7.50 below the index. Seasonally large supplies and weak demand routinely drive such losses from late fall into early winter. The end of retail industry demand for holiday hams also tends to undercut the hog and pork complex in mid-December. Nevertheless, we still harbor suspicions the previously discussed demand strength (aside from seasonal weakness) and moderated hog supplies could limit the market’s downside in the coming weeks.
90-day outlook: Long-term history points to a seasonal rebound from around annual lows between Christmas and New Years which have often carried it to a winter high around mid-February. But in more recent years, the hangover from the holidays has tended to extend into the new year. We’re inclined to think the current situation will power a more typical rebound, but that’s in no way guaranteed, especially if the anticipated hog supply increase implied by the September USDA Hogs & Pigs report comes to pass. Ultimately, we think the fall-winter hog outlook will prove relatively firm, but some form of seasonal weakness is generally unavoidable.
What to do: Get current with feed coverage. Carry all production risk in the cash market for now.
Hedgers: You have 50% of fourth-quarter production hedged in December $84.00 put options at $2.075 and 50% of first-quarter production hedged in February $84.00 puts at $3.35.
Feed needs: You have all of fourth quarter and 25% of first quarter 2025 soymeal needs in the cash market. You should also have all corn-for-feed needs covered in the cash market through November.
Cattle
Price action: December live cattle futures closed steady at $182.95, nearer the daily low and hit a seven-week low early on. For the week, December cattle lost 75 cents. January feeder cattle futures soared $4.025 to $247.225, nearer the daily high and hit a four-week high. On the week, January feeders rose $5.80.
5-day outlook: The live and feeder cattle futures markets somewhat diverged to end the trading week, with December live cattle pausing, while January feeders closed solidly up and at a technically bullish weekly high close. It will be critical early next week to see which market establishes leadership for the other to follow.
Cash cattle trading activity so far this week has been mostly around $185.00, both in the Southern Plains and northern market. That was down around $1.50 from last week’s five-area weighted average. Texas-Oklahoma, Kansas and Nebraska trading was all at or very near $185.00, but the heaviest official trading was in Iowa-southern Minnesota, averaging $184.42. Packers’ purchase volumes could be light again this week as feedlots resisted actively selling cattle at lower prices.
USDA this morning reported U.S. beef export sales of 14,200 MT for 2024, up 78% from the previous week and 8% from the four-week average. The noon report today showed wholesale boxed beef values mixed, with Choice falling 39 cents to $303.41, while Select rose 13 cents to $276.79. Movement at midday was 66 loads. The Choice-Select spread is presently $26.62.
30-day outlook: USDA feedlot numbers continue to suggest tight supplies of market-ready animals into the end of the year. However, record cattle weights recently are boosting beef supplies. When combined with a rise in cattle slaughter lately, such has pushed weekly beef production above year-ago levels. The increases are unlikely to last long, however. This week’s consumer inflation data suggests consumer demand for beef at the meat counter will remain strong. While October beef prices rose above year-ago levels by 1.9%, they fell 1.2% from September. Importantly, steak prices saw monthly and annual declines of 2.9% and 2.5%, respectively.
90-day outlook: The macro-economic picture looks bright for the cattle and beef markets in the coming months. This week’s inflation reports showed “sticky” price inflation but not problematic. Retail sales data Friday beat market expectations and suggested a healthier U.S. economy and better consumer confidence. Major U.S. stock indexes this week hit more record highs and the new presidential administration has promised lower taxes. All of the above bode for better consumer demand for beef at the grocery store.
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 of fourth quarter and 25% of first quarter 2025 soymeal needs in the cash market. You should also have all corn-for-feed needs covered in the cash market through November.