Livestock Analysis | January 19, 2024

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: Hog futures ended the week rather poorly, with the nearby February contract sliding 35 cents to close at $70.75. That represented a weekly decline of $1.15.  

5-day outlook: The short-term outlook still looks supportive for hog prices. The CME lean hog index for Wednesday once again matched the preliminary figure at $67.87, up 53 cents from Tuesday. Thursday’s preliminary calculation puts that day’s quote up another 19 cents higher at $68.06. The smaller size of the advance may have discouraged futures traders today, since the February contract remains at a significant premium. Nevertheless, wholesale strength continues pointing to robust demand from grocers. Cutout dipped Thursday afternoon, but still ended the day 77 cents higher (at $88.73) than Wednesday. Today’s midsession quote for pork cutout advanced another $1.01 to $89.74, mainly on strength in bellies and butts.

Although this week’s increased slaughter at 2.652 million head (up 22% and 4.4% from last week and last year, respectively) looks negative, last week’s Iowa-southern Minnesota hogs, at 291.3 pounds per head, averaged 1.8 pounds less than they did the week prior, suggesting pigs are not backing up on farms. We think the industry is simply catching up after four weeks of packing industry cutbacks due to the holidays and the wintry weather of the past week.

30-day outlook: History indicates a hog market tendency to rise from early January into mid-to-late February, with the market then generally tending to work sideways to lower. Given the strength seen so far this year, we’re inclined to expect a repeat of the historical pattern over the next month. We also harbor suspicions that late winter-early spring price direction depends heavily upon the ham market and retailers’ willingness to feature hams aggressively during the run-up to Easter. December ham prices were relatively high, which doesn’t seem to bode well for March of this year, since Easter arrives March 31. Still, given the extremely poor movement of hams seen at elevated prices last Easter, we suspect they’ll take the opposite tack this year. If so, the hog/pork complex may prove surprisingly strong through late winter.

90-day outlook: It seems quite apparent that grocers maintaining retail pork prices at or near record highs played a major role in keeping the hog and pork markets at depressed levels into early spring 2023. Once they cut prices and started marketing pork more actively toward late spring, the complex rallied strongly and maintained comparatively high levels into fall. Surprisingly large hog and pork production hurt prices later in the year. If the USDA is correct in anticipating largely unchanged hog supplies during the spring quarter, the usual spring rally could prove quite large, especially if grocers continue pricing pork at comparatively low levels. This suggests summer futures priced in the $90.00-$95.00 range may be underpriced. Conversely, persistent hog supply increases similar to those routinely (and unexpectedly when relying upon USDA data) seen in 2023 might limit the seasonal advance to the area indicated by those futures contracts.

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 January. 

 

 

Cattle

Price action: April live cattle futures fell 27 1/2 cents to $177.375 and near mid-range. For the week, April cattle rose $3.20. March feeder cattle futures dropped 60 cents to $231.95 and nearer the session low. On the week, March feeders gained $4.25.

5-day outlook: Today’s price action in the cattle and feeder futures saw mild downside corrections after both markets scored seven-week highs Thursday. Bulls still have upside momentum to suggest follow-through price strength early next week. The cattle markets were also pausing ahead of this afternoon’s monthly USDA Cattle on Feed report. A Reuters survey showed traders expected the report to show cattle on feed up 2.1% from year-ago at 11.927 million head. Analysts expected placements down 4.6% and marketings in December to be down 0.7%. See Evening Report for the report results.

Cash cattle negotiations were at a standstill as of midday today, with feedlot operators asking $174.00 to $175.00 but with limited packer bids. Today’s noon report showed Choice grade boxed beef cutout value slipped another 34 cents to $295.95, while Select rose $1.19 to $284.95, narrowing the Choice/Select spread to $11.00. Movement at midday was 61 loads. USDA today reported net U.S. beef export sales of 21,400 MT for 2024 during the week ended Jan. 11.

30-day outlook: Wintry weather conditions in the Midwest have been and this weekend will remain a detriment to cattle performance and feedlot marketing efforts. World Weather Inc. today said an arctic air mass will be in place over the Plains states today and Saturday before it moderates and moves off to the east. While the snow and extreme cold conditions in cattle country may be near-term bullish, weather-delayed cattle marketings could ramp up slaughter numbers, and possibly weigh on prices, in the next couple weeks.

90-day outlook: This week’s U.S. retail sales report for December was an upbeat surprise to the marketplace. That helped to push the U.S. stock indexes to new highs for the new year and at or near 12-month highs. That implies better consumer confidence, which in turn likely translates into better demand for beef at the meat counter—despite still-elevated retail prices. Seasonal factors also are likely to support cattle prices into spring, especially if cold and snowy conditions return to cattle country as winter progresses.

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 January.

 

 

Latest News

H&P Report negative compared to pre-report expectations
H&P Report negative compared to pre-report expectations

Nearly every category topped the average pre-report estimates.

After the Bell | March 28, 2024
After the Bell | March 28, 2024

After the Bell | March 28, 2024

Pro Farmer's Daily Advice Monitor
Pro Farmer's Daily Advice Monitor

Pro Farmer editors provide daily updates on advice, including if now is a good time to catch up on cash sales.

PF Report Reaction: Bullish USDA data for corn
PF Report Reaction: Bullish USDA data for corn

Corn planting intentions and March 1 stocks came in lower than expected.

Report Snapshot: USDA shows lighter-than-expected corn acres and stocks
Report Snapshot: USDA shows lighter-than-expected corn acres and stocks

USDA reported corn acres of 90.036 million acres for 2024 and March 1 stocks of 8.347 billion bu., both well below trade estimates. Soybean acres were slightly lower than expectations, while stocks were higher.