Hogs
Price action: Hog futures traded on both sides of unchanged Friday, then closed modestly lower. Nearby October settled at $78.45, down 45 cents on the day and $1.05 on the week.
5-day outlook: Cash hog prices continued sliding through Thursday, with Wednesday’s official CME index quote dipping 11 cents to $85.35 and Thursday’s preliminary calculation indicating another 48-cent drop to $84.87 when it’s officially quoted next Monday. The implied downward acceleration of losses likely spurred increased futures selling, and if it continues next week, we’ll probably see more of the same. We still think consumer demand is holding up well, but seasonally increasing slaughter and pork production are depressing prices across the whole complex. This week’s preliminary slaughter total reached 2.571 million head, up 36,000 (1.2%) from the same week last year, pointing to hog supplies somewhat larger than the 1% increase indicated on the USDA’s June Hogs & Pigs report. This may bode ill for next week’s price action.
30-day outlook: The 10-year average for pork cutout has shown a historical tendency to rise moderately, from $87.15 in early September, to $91.40 in the second week of October. It that pattern is at least partially repeated over the next month, that could provide considerable support for cash hog and futures prices despite the tendency for hog slaughter to continue climbing. The industry will get a better idea of forthcoming hog supplies when the USDA publishes its quarterly Hogs & Pigs report on Thursday, September 26. We see little reason to think it will indicate a significant divergence from the upward 1%-2% trend in hog population seen over the past 21 months.
90-day outlook: Large hog slaughter will almost surely be a constant through the fourth quarter and into early 2025. Kills traditionally peak in the last full workweek before Christmas. Prices may hold up relatively well if recent indications of ham stocks at their lowest levels since the summer-fall of 2020 persist through fall. Ham prices tend to remain elevated into mid-December, then drop when grocers complete their holiday-related buying. The combination of peak supplies and weak demand usually causes hog prices to reach annual lows between Christmas and New Year’s. We see little reason to think that won’t be the case this year. The strength of consumer demand, as largely dictated by the grocery industry’s retail pork pricing, will play a big role in how low that bottom will prove to be.
What to do: Get current with feed advice. Carry all production risk in the cash market for now.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all corn-for-feed and soymeal needs covered in the cash market through August.
Cattle
Price action: October live cattle futures fell 37 1/2 cents to $177.65 and near mid-range. For the week October cattle rose $2.475. October feeder cattle futures lost 62 1/2 cents to $239.125 and near mid-range. On the week, October feeders gained $8.175.
5-day outlook: Despite Friday’s modest losses in nearby live and feeder cattle futures, the bulls had a good week. It looks like the average cash cattle price this will halt a multi-week decline, while boxed beef movement has been good late this week. Cash cattle trade so far this week has been at roughly steady prices. Some feedlots continue to hold out for higher bids. Light cash trading occurred across the board Thursday, with a few in Iowa at $181.14, with the rest changing hands in Nebraska, Texas and Oklahoma at $181.00. Packer margins have improved and are in the black, giving them some room to raise bids if they need supplies. Today’s noon report showed Choice-grade boxed beef prices fell another $2.11 to $305.07, while Select grade fell 84 cents to $294.80. Movement at midday was good at 97 loads. The Choice-Select spread is presently $10.27. Next Friday also brings the monthly USDA cattle-on-feed report.
30-day outlook: Choice-grade beef prices have been generally stable lately, while the cash cattle market has dropped over $14.00 between late July and early September. This has put beef packer margins back into the black. That should improve packer demand for fed cattle in the coming weeks. Meantime, August retail beef prices were around unchanged from July. That fact, along with steak prices just 1.2% over one year ago, augurs well for robust autumn demand for cattle/beef.
90-day outlook: The Fed’s FOMC monetary policy meeting comes next Wednesday, which will almost surely show the Fed lowering interest rates, with more rate cuts likely coming before the end of the year. Such moves will work to lift consumer confidence heading into the end of the year, making them more likely to purchase beef at the meat counter. The fly in the cattle bulls’ ointment may be a shaky U.S. stock market the next six weeks. History shows the months of September and October can be rocky for the stock market.
What to do: Get current with feed advice. 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 have all corn-for-feed and soymeal needs covered in the cash market through August.