Hogs
Price action: Hog futures ended the week on a mixed note, with nearby April sliding 32.5 cents to $86.70, while most-active June slid 40 cents to $95.775. That represented a $1.70 drop from last Friday’s close.
5-Day outlook: Hog futures proved unable to sustain their initial bullish reaction to the bullish results of Thursday’s USDA Hogs & Pigs report. The numbers implied hog supplies might run slightly ahead of year-ago rates into mid-April, which may help explain the weak closes posted by the nearby contracts. Cash weakness may also be weighing on futures. The latest quote (for Tuesday) for the CME lean hog index is $89.13. Wednesday’s figure is expected to come in unchanged, but the calculation for yesterday seems likely to post a 35-cent drop to $88.78.
Industry insiders seem to be anticipating a repeat of the flat to modestly higher cash performance last spring, since the nearby April contract is priced below the index (with about two weeks until expiration) and the summer contracts are carrying moderate premiums over the cash equivalent. Still, bulls have reason for short-term optimism, especially after the pork cuts posted across-the-board gains and boosted cutout $3.91 to $98.75 at midsession today. After falling almost 4% under year-ago last week, this week’s slaughter reached 2.480 million head, which marked a year-to-year increase of 86,000 head (3.6%). This suggests surprisingly plentiful supplies, but Easter 2024 came this same weekend last year, so hog slaughter for this week and next were depressed by the holiday last year. Thus, there is little danger of the industry being swamped by hogs in the short run.
30-day outlook: The Hog & Pigs report implies hog supplies will slip marginally below year-ago levels during the second half of April stay that way through the balance of spring and summer. There is little reason to think the usual seasonal decline in hog supplies won’t materialize again this spring. Conversely, grilling season demand for pork chops, ham and pork steaks, brats and ribs should prove quite robust, especially with retail beef prices likely to prove quite elevated. We also think relatively tight pork belly stocks will support that market very well as BLT season gets underway. Thus, the short-term price outlook seems favorable for the hog and pork complex.
90-day outlook: We are inclined to expect a much more historically normal price response this year than last. That is, hog prices proved unexpectedly weak during the second quarter of 2024, then posted a nearly-as-surprising surge to the upside after Independence Day, whereas the normal pattern holds with flat-to-higher early-summer prices followed by a sharp August decline. We believe the spring-summer 2024 price action reflected grocers maintaining retail pork prices at elevated levels during spring, which stifled consumer offtake. They then featured pork much more aggressively during the second half of the year, which boosted cash and futures values substantially. We think they’ll continue that pattern of active features in the coming weeks, which should enable a more normal seasonal price advance in cash hog prices. If so, summer futures look somewhat underpriced.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
Feed needs: You have all corn-for-feed needs covered in the cash market through April. You have all soymeal needs covered in the cash market through May.
Cattle
Price action: June live cattle futures fell 95 cents to $204.85, nearer the daily low and for the week up $2.075. May feeder cattle futures lost $1.35 to $285.175, nearer the daily low and on the week up 7 1/2 cents.
5-day outlook: The cattle futures markets today saw some routine profit-taking pressure from speculators as prices are not far below their contract/record highs. Cash cattle and beef market fundamentals remain solid, suggesting more price gains are likely next week. Cash cattle trading this week has so far taken place around $212.50 in the USDA five area region. That’s $3.00 to $4.00 higher than last week at the same time, but virtually steady with the week-ending average. The noon report today showed Choice-grade boxed beef prices fell $2.33 to $333.39, while Select rose 92 cents to $320.36, narrowing the Choice/Select spread to $13.03. Movement at midday was decent at 88 loads.
30-day outlook: The spring grilling season ramps up in April, which should see better consumer demand for beef at the meat counter, although consumer demand recently has also been robust—evidenced by the boxed beef cutout north of $330.00.
The general marketplace has been more risk-off the past several weeks, amid the U.S. trade tensions with other major economies. That has sapped consumer confidence and that’s worrisome for cattle market bulls. If the U.S. stock market continues to sell off, consumers worried about their pocketbooks may turn to cheaper meats at the grocery store.
90-day outlook: The cattle markets have received positive longer-term fundamental news the past week. The March 21 USDA cattle-on-feed report showed U.S. cattle inventory was 2 percent below March 1, 2024. Cattle placements were down 18 percent from the same time in 2024. While cattle traders expected a bullish monthly cattle-on-feed report, the data met and even exceeded bullish trader expectations. Meantime, the latest monthly USDA cold storage report, out this week, showed bullish beef stocks data. Reduced supplies and good demand promote the argument that cattle and beef prices can remain elevated for an extended period of time.
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 corn-for-feed needs covered in the cash market through April. You have all soymeal needs covered in the cash market through May.