Livestock Analysis | November 17, 2023

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: Hog futures proved mixed Friday, with nearby December slipping 50 cents to $70.975, along with a February loss, whereas deferred futures posted modest gains. December hogs ended the week having declined 92.5 cents from last Friday.                                                                                           

5-day outlook: The hog and pork complex largely remained stable this week, although the CME lean hog index has apparently turned seasonally lower once again. As indicated by the preliminary figure, Wednesday’s official index quote fell 38 cents to $75.68. Today’s calculation has yesterday’s result likely coming in at $75.09, down another 59 cents. In contrast, after dipping to $85.92 at the end of Thursday’s trading, pork cutout jumped $3.07 to $88.99 at midsession today. That will probably dip by the end of the day, but it still points to solid consumer demand, especially when considering hog slaughter over the past five weeks has averaged 2.5% over year-ago levels. This week’s preliminary total came in at 2.649 million head, up 2.0% from last year. We look for limited cash and futures trading and a tendency to continue trading sideways next week as the industry prepares for the Thanksgiving holiday.           

30-day outlook: Hog slaughter will likely surge as the industry gets back to work after the holiday, with the weekly total probably reaching its annual peak during the week ending Dec. 16 (since Christmas on a Monday will likely truncate packing industry activity on Saturday, Dec. 23). Wholesale ham and turkey demand should also prove strongest in mid-December, with ham prices then tumbling when grocers have largely met their holiday needs. Hog and pork prices seem likely to be well-supported through midmonth, then prove vulnerable to a drop to fresh fourth-quarter lows between the Christmas and New Years holidays. USDA’s September Hogs & Pigs report implied hog supplies would be running close to year-ago levels at that point, but the 2023 pattern has been for 2%-3% annual increases. That might also exert added downward pressure on the complex. The December Hogs & Pigs report will be released on December 22.

90-day outlook: The first quarter of the year has traditionally tended to experience moderate gains during the first six-seven weeks of the year, followed by seasonal pressure during Lent. However, in recent years, particularly in early 2023, the market proved surprisingly weak through much of the first quarter. Seasonal and cyclical reductions in hog and pork production would likely give the complex a boost, but the former seems much more likely than the latter.  Active ham buying for Easter features has often supported the market early in the year, but greatly elevated retail ham prices undercut that market, and hog prices, in early 2023.

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.   

 

 

Cattle

Price action: Cattle and feeder futures rebounded moderately from Thursday’s big losses. December live cattle climbed $1.00 to $175.75, which represented a $1.575 weekly advance. January feeder futures also rallied $1.00 to $228.50 at Friday’s close, marking a weekly rise of $2.075.

5-day outlook: Next week’s price action seems likely to be muted with Thanksgiving arriving on Thursday and packers cutting back on activity later in the week. Still, they will likely become more active in pursuing cattle next week as they look to ramp production up again the week following. This could prove supportive of cash prices since they won’t gain access to cattle contracted for December until Saturday, Dec. 1. Beef prices slipped this week, which may work against bullish and producer interests, but having the first weekend in December separated from Thanksgiving by eight days will give grocers the opportunity to actively feature beef that weekend. This could also prove supportive of the cash and wholesale markets.

Next week’s activity will start with the industry reaction to this afternoon’s monthly USDA Cattle on Feed report. It’s widely expected to hold bearish results, so numbers with a neutral to positive tone could spark early-week strength. See “Evening Report” for the report results.

30-day outlook: Steer dressed weights essentially stalled at 827 pounds per head through much of October and the first week of November, with the latest reading dipping one pound below the same week last year (although still well above the five-year average). This implies the supply of market-ready animals in feedlots remains tight. And while the spread between choice- and select-grade beef narrowed significantly this week, the relative gains posted by select cuts may reflect demand strength for the cheaper cuts rather than an excess of choice product. Thus, the cattle and beef markets may prove surprisingly firm into the year-end holiday season.

90-day outlook: Fed cattle supplies and weekly slaughter rates typically decline significantly during the first quarter, with the latter totals usually reaching their lowest (non-holiday) levels of the year in late February or March. When combined with grocers ramping up their late-winter buying as they anticipate the onset of grilling season, this often gives the cattle/beef sector a positive tone. We see little reason to expect otherwise in early 2024, especially with the domestic cattle population likely falling to cyclical lows in 2024 or 2025. 

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.  

 

 

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