Hogs
Price action: Hog futures ended the week strongly, with nearby December futures climbing 87.5 cents to close at $81.675. That represents a weekly rise of $2.175.
5-day outlook: Stable cash hog and wholesale pork values supported hog futures Friday. As expected, the CME stated Wednesday’s hog index at $87.44, down 39 cents from Tuesday. Today’s USDA data indicates Thursday’s quote will dip another 43 cents to $87.01. And while prices are clearly sliding, the ongoing decline is modest when compared the seasonal breakdown traditionally seen at this time of year. Pork cutout has also been slipping, having fallen $1.53 to $93.07 yesterday, but it bounced 92 cents to $93.99 at midsession today. We still view the situation as remarkably stable for this time of year, reflecting robust consumer demand and supplies persistently below early-fall expectations. This week’s kill total is estimated at 2.565 million head, up 344,000 (15%) from last year, when Thanksgiving came this week. Next week’s kill will likely register a similar drop. We won’t get another good reading on relative hog supplies until the first week of December. Still, current conditions imply the anticipated seasonal decline will be limited next week, although the arrival of Thanksgiving on Thursday can sometimes shake things up.
30-day outlook: It’s common knowledge that hog supplies and weekly slaughter typically reach their annual highs in mid-December (the last full workweek before Christmas). That’s also the point when grocers have completed their wholesale ham purchases for holiday dinner entrees, with the resulting combination of large supply and weak demand helping to push the cash market toward annual lows, usually in the week between Christmas and New Year’s Day. We see little reason to think the market won’t be comparatively weak at that time. There’s a decent chance the low might come in above the October low of $83.96, but nearby December futures suggest a fresh bottom will be made in early-to-mid-December, with further seasonal losses coming later.
90-day outlook: A significant price rebound early in the new year has been rather traditional for the hog and pork complex, but sustained weakness into early January has been rather common in the last few years. That likely reflects diminished demand for pork chops than in the past. However, with grocers featuring pork rather aggressively since Independence Day, that may bode well for a quick rebound, especially if the comparative tightness of hog supplies seen this fall carries over into 2025. While not especially optimistic about the winter price outlook, we think downside risk will be limited.
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 soymeal needs in the cash market through the third week of January. You should also have all corn-for-feed needs covered in the cash market through mid-December.
Cattle
Price action: December live cattle futures rose $1.175 to $186.775, nearer the session high and hit a three-week high. For the week, December cattle rose $3.825. January feeder cattle gained 85 cents to $254.30, near mid-range and hit a four-month high. On the week, January feeders were up $7.075.
5-day outlook: Feeder cattle futures led gains in the cattle complex this week. Look for feeders to exhibit leadership again next week. The technically bullish weekly high closes Friday in December live cattle and January feeders also suggest more chart-based buying early next week.
In relatively light but widespread cash cattle trade so far this week, USDA reports 9,020 head of cattle officially traded in the four main regions Thursday, with the average coming in at $185.79. That’s up almost $1.00 from last week. Cattle traders will also get direction from this afternoon’s USDA monthly Cattle on Feed report. Analysts expect that report to show the large feedlot (1,000-plus head) inventory down 0.1% from year-ago as of Nov. 1. The report is expected to show a 3.8% increase in placements, while marketings are anticipated to be up 5.2% from October 2023.
The noon report today showed Choice grade boxed beef values up $1.44 at $308.23 and Select grade down 49 cents to $272.43, taking the Choice-Select spread to $35.80. Movement at midday was 52 loads.
30-day outlook: This week’s widening in the spread between Choice and Select grades of beef reached $37.39 at midday on Nov. 20. That’s comparable to the spread’s record highs from June 2021, which implies an extreme shortage of high-quality beef animals despite the high slaughter weights seen this fall. That suggests renewed cash cattle market strength in the coming weeks and possibly beyond. In early 2025 the domestic cattle population is expected to see a cyclical low.
90-day outlook: A booming U.S. stock market, recent Federal Reserve interest rate reductions and the prospects of lower tax rates for Americans under a Trump administration have put U.S. consumers in upbeat moods heading into the holidays and the new year. That bodes well for better consumer demand for beef at the meat counter in the coming months.
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 soymeal needs in the cash market through the third week of January. You should also have all corn-for-feed needs covered in the cash market through mid-December.