Hogs
Price action: Slipping cash and wholesale prices seemed to undercut hog futures Friday. Expiring October hog futures sagged 15 cents to $84.025, while most-active December skidded 25 cents to $76.15. The latter quote represented a weekly rise of $2.775.
5-day outlook: After rebounding significantly early this week, the hog index looks set to dip when Thursday’s official quote is released Monday morning. The CME confirmed Wednesday’s quote at $74.90, up 45 cents from Tuesday (and up about 85 cents from last week’s low), but today’s USDA data indicates yesterday’s official figure will come in 7 cents lower at $84.83. Pork cutout also sagged 22 cents to $94.80 yesterday afternoon, then fell another 77 cents to $94.03 at midsession Friday. Pork demand from consumers and grocers still appears very strong, which should prove supportive. Hog numbers also seem surprisingly tight. After falling well below year-ago the previous two weeks, this week’s preliminary slaughter total at 2.586 million head topped the comparable 2023 total by just 11,500 head (0.4%). Conditions still look price supportive of short-term prices.
30-day outlook: History, in the form of 10-year averages, suggests hog and pork prices could remain strong over the next 10 days to two weeks. At that point, the supply/demand balance has tended to heavily favor bears, with hog prices tending to work their way lower through the last week of the year. On the other hand, having the cash market post a late summer or early fall low isn’t all that rare. For example, it bottomed in late September 2019 and in late August of 2018. Still, it would be entirely premature to think about calling a short-term bottom at this juncture.
90-day outlook: The size of fourth-quarter hog supplies will be a major determinant of the price outlook for the balance of the year. The Sept. 26 USDA Hogs & Pigs report painted a bleak picture on that score, indicating hog slaughter during September and early October could run 5% over year-ago levels, with supplies for the following six weeks or so topping year-ago by about 3.5%. Late-fall and winter numbers were seen running about 1% over those from 12 months earlier. But, as mentioned above, the low totals posted over the past three weeks are raising serious doubts about the USDA data. On the other hand, if the indicated increases begin showing up in the days ahead, the outlook turns that much more bearish. Bulls can still bank on strong demand and relatively tight ham stockpiles for fourth quarter support but might do little more than limit losses if hog numbers surge.
What to do: Carry all production risk in the cash market for now.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You are hand-to-mouth on corn-for-feed and soymeal needs.
Cattle
Price action: Cattle futures ended the week on a firm note, with expiring October live cattle surging $1.00 to $187.00 and most-active December rose 60 cents to $187.00, also. The latter represented a weekly advance of $2.525. Expiring October feeder futures rallied 65 cents to $249.625, while most-active November climbed $1.15 to $249.275. That marked a weekly gain of $3.575.
5-day outlook: It certainly looks as if the cattle and beef complex could start next week on a strong note, since both the cash and wholesale markets are exhibiting considerable strength. Cash trading remained light through Thursday, with limited trading in Kansas and Iowa. Lots totaling 286 head changed hands at $185.73 in Kansas, while 458 traded at $188.50 in Iowa-southern Minnesota. This suggests the national average will fall within the $186.00-$187.00 range when this week’s totals are tabulated. Moreover, choice beef cutout surged $2.56 to $302.36 at midsession and select cutout jumped $3.85 to $287.14. Cutout may set back before the weekend, but this implies demand from consumers and packers will remain strong in the short run.
30-day outlook: Grocers will likely continue buying beef aggressively through mid-October as they gather supplies for planned early-November beef features. That period could prove quite strong relative to early-November buying of the past 2-3 years since Thanksgiving came very early in those years, whereas it doesn’t arrive until Nov. 28 this year. Conversely, grocer buying could sag in late October and/or early November as the industry shifts its focus to turkeys and hams for Thanksgiving features.
90-day outlook It isn’t uncommon for the cattle and beef markets to prove comparatively weak during December. That weakness showed up in spades last fall, with Nebraska steer prices plunging from $186.69 in mid-October to $168.62 in mid-December. A repeat of that breakdown would be very surprising, especially after the market already set back so sharply from the July high. As long as consumer demand strength persists, the fall-winter price outlook seems likely to prove solid.
What to do: Carry all production risk in the cash market for now.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: You are hand-to-mouth on corn-for-feed and soymeal needs.