Hogs
Price action: Expiring October hog futures rose 5 cents to $84.075 Friday, while most-active December climbed 70 cents to $77.65. That close represented a weekly rise of $1.50.
5-day outlook: The hog and pork complex exhibited considerable firmness this week, as indicated by the CME lean hog index being officially stated at $84.47 Wednesday, unchanged from Tuesday. Thursday’s preliminary quote dipped 18 cents to $84.29, which is virtually unchanged from last Friday’s quote. October futures, which go off the board at noon Monday imply a slight drop over the weekend. Meanwhile, pork cutout remained stable as well. After dipping 33 cents to $94.87 Thursday, that figure bounced 50 cents to $95.37 at midsession today.
Firm cash and wholesale prices at least partially reflect robust consumer demand for pork, which seems likely to persist in the short run. Hog supplies continue running at relatively low levels as well, with this week’s preliminary total reaching 2.584 million head, down 24,000 head (0.9%) from year-ago and marking the third time in the past four weeks the weekly total has fallen short of the comparable year-ago figure. This diverges dramatically from the USDA’s implied September-November hog supply estimate 3.5%-5.0% over year-ago levels. These conditions look supportive of next week’s price outlook.
30-day outlook: History in the form of long-term moving averages imply cash hog and wholesale pork prices will begin a seasonal downturn next week. That traditionally reflects diminished consumer demand and increased hog slaughter, both of which are driven by seasonal forces. December futures indicate a modest decline over the next two months, whereas much larger declines occurred in late 2022 and 2023. The persistent firmness seen lately suggests the downturn won’t be all that severe. We tend to agree with such ideas, especially if consumer demand remains robust and hog supplies continue falling well short of the sizeable year-to-year increases implied by the September USDA Hogs & Pigs report.
90-day outlook: The year-end holiday season will probably start affecting the hog and pork sector during the run-up to Thanksgiving, particularly with domestic ham and whole turkey stockpiles proving relatively small in recent USDA Cold Storage reports. While not down drastically, those inventories will do less to supplement ongoing hog and turkey production than over the past three years. As with the shorter-term outlook, hog supplies and slaughter rates will greatly affect the price outlook. If we are correct in expecting active grocer features of pork in the coming weeks, that will also tend to limit the seasonal downside likely faced by the complex.
What to do: Get current with feed coverage. Carry all production risk in the cash market for now.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have all soymeal needs covered in the cash market through November. You have all corn-for-feed needs covered in the cash market through October.
Cattle
Price action: December live cattle futures fell 70 cents to $187.575, near the daily low after hitting a nine-week high early on. For the week, December cattle gained 57 1/2 cents. November feeder cattle futures fell 15 cents to $249.80 and nearer the daily low. For the week, November feeders rose 52 1/2 cents.
5-day outlook: The cattle futures markets paused today after the bulls had another good week. With solid near-term price uptrends in place in live and feeder cattle futures, look for the chart-based speculators next week to continue to probe the long side of the markets. Improving cash market fundamentals should also support upside price action in cattle futures next week. Active cash cattle trading broke out Thursday, with USDA reporting 16,312 steers traded for an average of $187.12. Southern Plains cash cattle strength was particularly impressive. The noon report today showed boxed beef cutout values up again, with Choice grade gaining $1.10 to $311.05 and Select grade rising 98 cents to $291.71. Movement at midday was 51 loads. The Choice-Select spread is presently $19.34.
30-day outlook: Boxed beef values have risen lately despite record-high steer weights that are inflating beef production to above year-ago levels. The cash cattle and wholesale beef strength suggest solid near-term consumer demand for beef at the meat counter despite elevated retail beef prices. Still, beef prices are not that far above year-ago levels. The fact that September steak prices rose just 1.0% annually looks quite supportive of the short-term outlook.
90-day outlook: Recent U.S. economic data that includes a stronger U.S. jobs report last week and tame U.S. inflation data this week, as well as the likelihood of still-lower interest rates from the Federal Reserve to end the year, bode well for upbeat consumer confidence in the coming months. This is evidenced by major U.S. stock indexes this week hitting record highs. This, along with still-tight supplies of market-ready animals in the feedlots, should continue to support stronger consumer demand for beef into next year.
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 covered in the cash market through November. You have all corn-for-feed needs covered in the cash market through October.