Hogs
Price action: Hog futures rebounded quickly from Thursday’s drop, with nearby December futures jumping $1.025 to $79.675. That represented a weekly rise of $1.85.
5-day outlook: Seasonal patterns suggest a looming downturn in hog and pork values due to historical tendencies for hog slaughter and pork production to continue working toward an annual high in mid-December, whereas consumer demand for pork cuts other than hams typically diminishes at this time of year. But that’s not assured this year, as exemplified by recently persistent gains in both cash hog and pork cutout values. The CME officially confirmed Wednesday’s hog index quote at $85.20 and USDA data implies it Thursday’s quote will rise another 23 cents to $85.43. And, as has often been the case on summer-fall Fridays, today’s noon pork quote jumped $3.40 to $101.55. Big ham and pork belly gains powered the rise. And while an early-week pork setback has often followed such Friday strength, there’s no denying the implied demand strength behind the gain.
Next week’s action seems likely to favor bulls, especially after this week’s slaughter again came up short of the year-ago total. The preliminary USDA figure reached 2.593 million head, down 18,000 (0.7%) from a year-ago, again pointing to surprisingly tight hog supplies and implying more of the same through late 2024. The outcome of the monthly USDA Cold Storage report set for release later this afternoon could affect the market, but it seems likely to continue the mid-2024 pattern of pork inventory data falling short of historical norms.
30-day outlook: As indicated previously, cash hog and pork values routinely prove weak at this time of year. This is true even in years when the market has enjoyed a short-term bullish run between Labor Day and mid-October. It’s certainly possible the supply of pigs showing up at market will surge into line with the big increases indicated by the September USDA Hogs & Pigs report and/or consumer demand will sag on a seasonal and/or cyclical basis. But as long as recent trends persist, a firm short-term outlook seems more likely. On the other hand, it’s hard to argue with December hog futures, which expire December 13, trading at a modest discount to the latest cash quote.
90-day outlook: Hog supplies and the year-end calendar often cause weekly hog slaughter to peak during the last full work week before Christmas. Conversely, industry demand for wholesale pork turns sharply lower after grocers have met all their Christmas-New Year’s Day ham needs in mid-December. The combination of peak supplies and weak demand regularly causes the cash market to post a low during the last week of the year. We still expect seasonal pressure at that time. Long-term history implies a post-holiday rebound in hog and pork values, but the market has proven rather weak in January of some recent years.
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 should also have all corn-for-feed and soymeal needs covered in the cash market through November.
Cattle
Price action: December live cattle futures fell 10 cents to $189.15, nearer the daily high and hit a 3.5-month high early on. For the week, December live cattle gained $1.825. November feeder cattle futures rose 5 cents to $248.575 and nearer the daily high. On the week, November feeders rose 97 1/2 cents.
5-day outlook: The solid overall performances in the live and feeder cattle futures markets this week set the table for follow-through technical buying early next week. This afternoon’s monthly USDA Cattle on Feed report will also impact cattle futures trading next week. Analysts expect the agency will show the large feedlot (1,000-plus head) inventory down 0.3% from year-ago as of Oct. 1. That would be the first year-over-year decline since June. The report is also expected to show a 4.0% decline in the number of cattle moved into feedlots in September. Marketings are anticipated to be up 2.0% from September of 2023. USDA this afternoon will also report the latest frozen meat stocks at the end of September in the Cold Storage Report. The five-year average is a 15.1-million-pound increase in beef stockpiles. Cash cattle fundamentals remain solid. Active cash cattle trading Thursday saw 38,239 head sold. The average for all four main regions came in at $190.06, according to USDA. That’s around $2.50 higher than last week, extending the string of weekly gains to seven. The noon report today showed wholesale boxed beef values higher, with Choice-grade up 97 cents to $322.09, while Select rose 97 cents to $295.31. Movement at midday was 59 loads. The present Choice-Select spread is $26.78.
30-day outlook: Beef packers have taken advantage of cutting margins in the black by actively building slaughter inventories. A slowdown in the fresh beef market movement could limit further cash cattle gains. The coming weeks will see retailers move to featuring more hams and turkeys ahead of the holiday season. Cash cattle prices may prove vulnerable to a short-term drop, but we don’t expect a repeat of the fall 2023 breakdown.
90-day outlook: The macro-economic picture for the cattle market leans bullish. The U.S. stock indexes have moved through the historically difficult months of September and October and have rallied to record or near-record highs. Gasoline prices have backed down a bit from this year’s highs. Lower U.S. interest rates from the Federal Reserve make for lower borrowing costs for the consumer, which will make for likely better 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 should also have all corn-for-feed and soymeal needs covered in the cash market through November.