Livestock Analysis | November 10, 2023
Price action: December lean hogs rallied 45 cents to $71.90, notching a 15-cent gain on the week.
5-day outlook: Resurgent strength in wholesale pork today lent strength over to the futures market, though prices continue to flag on the daily bar chart. December lean hogs have largely consolidated over the past six sessions, apparently forming a “bull flag” on the daily bar chart. The downside has been firmly protected by $71.50 support, with prices surging off that level today. This will likely push hogs higher over the coming week on technical buying, especially if prices can bid above the $72.50 mark. The CME lean hog index bounced early in the week, evidenced by the third day of gains in a row that pegged the index 18 cents higher to $76.87 (as of Nov. 8). Seasonal weakness is resurging though, as the preliminary calculation for Monday puts the index down 59 cents, negating almost all this week’s bounce. If seasonal pressure continues, that could limit the gains seen in futures as the December contract inches toward expiration.
30-day outlook: After rising sharply on Monday, wholesale pork prices slipped for the remainder of the week, with prices giving up all of Monday’s gain and then some. That is, until today’s midsession quote, which once again saw cutout above the $90.00 mark, as carcass values leapt $4.08 to $91.02, led higher by picnic, though all cuts except ribs and loins saw gains. While it is not unlikely for some of these gains to be given up this afternoon, the continued strength in wholesale pork has proven robust and will likely keep the downside intact over the coming month. Grocers are likely to feature hams starting this weekend ahead of Thanksgiving, which comes early this year on Nov. 23. That backdrop, paired with robust consumer demand, is likely to help support hog futures over next few weeks.
90-day outlook: Sustained wholesale market strength is likely to persist past the next month, especially if consumer demand for hams and turkeys holds up well, for stockpiles for those products are relatively tight. The tightness of ham supplies, which reached three-year lows, is likely to continue to support wholesale prices, which have largely remained sideways over the past month, though today’s strength threatens that sideways trend. The September USDA hogs and pigs report imply late 2023 hog supplies will generally match those seen in late 2022, though robust consumer demand is likely to keep the hog and pork market relatively strong versus the depressed levels seen early this year.
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 have all corn-for-feed and soymeal needs covered in the cash market through November.
Price action: December live cattle futures fell 17 1/2 cents to $174.175 and hit a five-month low. For the week, December live cattle dropped $9.70. January feeder cattle futures rose $1.50 to $226.425 today and hit a seven-month low early on. On the week, January feeders lost $13.325.
5-day outlook: The cattle futures markets came off the rails this week, producing serious near-term technical damage to suggest more chart-based selling pressure from speculators next week. However, both live and feeder cattle futures markets are heavily short-term oversold and due for corrective bounces very soon. Cash cattle sales Thursday dropped $4 to $5. Also, not all feedlot operators had moved cattle so far this week. Thus, they will likely have to accept the sharply lower prices this week in a Friday transaction, or carry their cattle into next week, only adding to next week’s supplies. The noon report Friday showed Choice boxed beef rose 51 cents to $299.93, while Select fell $1.52 to $267.90, widening the Choice/Select spread to $32.02. Movement at midday today was light at 55 loads. There was scattered talk in the cattle futures markets this week that this month’s USDA cattle-on-feed report, due out next Friday, will also favor the bearish camp with a rise in placements.
30-day outlook: The present Choice-Select grade beef spread is around double the norm for this time of year, which suggests the supply of high-quality beef is still very tight. Warm and generally dry weather over much of the central U.S. the past week, with more of the same forecast for the coming week, will allow good feedlot conditions for better weight gains. The seasonal rise in cattle weights has recently boosted beef production but supplies remain well below normal. The reduced optimism in the cattle markets at present may improve the outlook by encouraging producers to keep marketings current and discouraging late-2023 placements.
90-day outlook: The recent solid rebounds in the U.S. stock indexes and hopes for a seasonal “Santa Claus” rally in equities will likely keep consumer attitudes upbeat heading into the holiday season. While recent U.S. economic data has not been as robust as the past few months, it certainly has not been downbeat. These factors are likely to keep American grocery shoppers putting their favorite meat into their carts at the grocery store, despite the historically elevated prices for retail beef cuts.
What to do: Get current with feed advice. All production risk in the cash market for now but be prepared for some hedge coverage as we have demand concerns.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have all corn-for-feed and soymeal needs covered in the cash market through November.
