Hogs
Price action: Hog futures followed the cattle market lower Friday, with nearby December futures leading the way lower. December lost 77.5 cents on the day to close at $80.425. That represented a weekly drop of $3.65.
5-day outlook: It looks as if the cash hog market may have reached a belated fall peak. As expected, the CME confirmed the hog index’s official Wednesday quote at $90.61, but Thursday’s USDA data indicate the index will dip 18 cents to $90.43 when it’s officially reported next Monday. Today’s futures drop, as well as the resulting December futures discount of almost exactly $10.00, implies considerable short-term pessimism now built into the market. However, the wholesale market isn’t cooperating with bears. Pork cutout did dive $4.19 to $97.96 Thursday, but a spike in wholesale pork belly prices helped power a stunning $7.19 leap in pork cutout to $105.10 at noon today. We strongly doubt that extreme strength lasted through today’s close, but we would not be surprised if relative pork firmness limits the anticipated cash decline next week. That would reflect the ongoing shortage of market-ready hogs. The USDA estimated this week’s hog slaughter at 2.605 million head, which marked a 27,000-head (1.0%) rise from the comparable 2023 total. We suspect next week’s total will again fall short of year-ago.
30-day outlook: The seasonal drop in the hog index from the second week of November to the second week of December, when the December contract expires, has averaged about $4.50 over the past 10 years. It’s entirely possible that the recent rally has opened the door to an exaggerated drop over the next 30 days. That might prove especially true if forthcoming hog supplies were to greatly exceed year-ago level (if it turns out that the big supply surge implied by the USDA’s September Hogs & Pigs report shows up belatedly). We seriously doubt that will be the case, but it can’t be entirely ruled out. Ultimately, we doubt the expected seasonal drop will prove as severe as implied by futures.
90-day outlook: Look for weekly hog slaughter to peak in the week before Christmas, with holiday disruptions slashing totals during the two weeks following. In recent years the backlog created by holiday season has tended to weigh heavily on hog and pork prices early in the new year. But the historical pattern has been for the market to recover from those lows to rally to a mid-February high, then stabilize or weaken into late winter. Much depends upon the size of early-2025 hog supplies. We tend to expect modest year-to-year increases. But we also think consumer demand will remain strong, especially if grocers continue holding the line on retail prices. Those factors would tend to keep the market relatively well supported.
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 down $2.125, hit a six-week low and closed near the daily low. On the week, December live cattle lost $2.225. November feeder cattle futures fell $2.225 to $245.425, near mid-range and closed at a five-week-low close. For the week November feeders were down $1.45.
5-day outlook: Today’s technically bearish weekly low closes in the cattle futures market set the table for follow-through, chart-based selling pressure from the speculators early next week. December live cattle futures have now seen a bearish downside breakout from a bear flag pattern on the daily bar chart. Wholesale beef weakness has been a bearish factor for the cattle futures markets this week. The noon report today showed wholesale boxed beef prices down again, with Choice falling 18 cents to $309.28 and Select down $1.59 to $278.13. However, movement at midday was solid at 104 loads, suggesting the recent slide in wholesale prices is drawing better demand. Cash cattle trade remained limited on Thursday as packers are hesitant to bid higher amid ample supplies and falling margins. There were 776 head reported sold Thursday for an average of $186.38 in Nebraska and 1,654 traded at $187.56 in Iowa-southern Minn. The total was 2,430 head, for an average price of $187.18. This is down about $2.50 from last week. We look for a similar drop in cash prices in the southern Plains this week.
30-day outlook: Packers are maintaining large cattle inventories following recent strong purchases. This may continue to weigh on cattle futures and beef cutout values in the coming weeks. It’s not a seasonally bullish time of year for the cattle market, with the holidays approaching and consumer focus now being more on turkeys and hams.
90-day outlook: The booming U.S. stock market and lower interest rates should bode well for consumer demand at the meat counter in the coming months. The S&P 500 stock index hit a record high this week and the Federal Reserve again lowered its main interest rate, this time by 0.25%. Prospects for lower U.S. taxes and lower gasoline prices in the coming months will also be good for consumer pocketbooks and therefor better consumer demand for beef.
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.