Livestock Analysis | February 23, 2024

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: The hog and pork complex remained strong through the end of the week. Nearby April lean hog futures settled at $87.20 today, unchanged on the day, but up $1.975 on the week.

5-day outlook: The cash hog and wholesale markets look likely to end the week on a strong note, which seemingly bodes well for next week as well. As expected, the hog index for Wednesday surged 81 cents to $78.78 when officially quoted this morning. The calculation for yesterday has it rising more modestly, up 32 cents to $79.10. And while pork cutout set back from the midsession quote and ended the day $1.72 higher, it added another 37 cents to $92.27 at noon today. A $10.00 drop in primal pork bellies was offset by across-the-board gains in the other cuts, including a big jump in picnic values.

This week’s hog slaughter is estimated at 2.578 million head. That’s up 19,000 head (0.7%) from last week, and 217,000 (9.2%) from the year-ago figure. We suspect the year-ago total was reduced by wintry weather, since this week’s figure topped the year-ago result for the first week of March by just 2.2%. Next week could also give us a better idea of whether grocers are planning to actively feature hams at Easter. If so, sustained ham market strength could continue supporting the market. If not, pork prices could turn lower and pull cash values downward as well. We expect this afternoon’s USDA Cold Storage report to reflect strong pork demand during January and prove supportive for futures. See Evening Report for the report results.

30-day outlook: March price action in the hog and pork complex can be bifurcated. That is, in years in which supplies are large and/or consumer demand is weak, hog and pork prices tend to work sideways to lower from a mid-to-late February peak. See last year. Conversely, in years of tight supplies and/or strong demand, the market can sustain the prior advance into spring. Price action in 2021 and 2022 exemplified such conditions. We think the latter pattern will occur again this year, expecting persistently robust consumer demand will greet seasonally diminishing hog and pork supplies, pulling prices moderately higher. Conversely, we don’t expect hog slaughter to fall as much as USDA suggested last December, which is likely to mitigate upside price potential. We’ll learn more about the supply outlook when the USDA publishes its quarterly Hogs & Pigs report on Thursday, March 28.

90-day outlook: We see no reason to expect the hog and pork markets to deviate from their history of great price strength this spring. Grocers are holding the line on passing rising wholesale prices on to consumers, so grilling season demand should prove quite vigorous. In contrast, hog supplies will almost surely decline substantially from current levels, following the historical pattern of dropping sharply from peak levels around the year-end holiday season to annual lows just before and after Independence Day. We tend to doubt prices will challenge the highs posted in 2021 and 2022 but would be surprised if they don’t surpass the 2023 peak. 

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 soybean meal needs covered in the cash market through February.

 

 

Cattle

Price action: April live cattle futures rose $1.35 to $187.90, a four-month-high close and on the week up 35 cents. May feeder cattle futures gained $2.75 to $262.075, near the session high and hit a four-month high. For the week, May feeders rose $6.45.

5-day outlook: Today’s gains in live and feeder cattle futures that produced technically bullish weekly high closes set the table for follow-through chart-based buying early next week. Cash market fundamentals are also solid, which will further encourage the cattle market bulls to be on the long side in the near term.

The latest USDA report confirmed a minimal amount of cash cattle trading taking place so far this week. About 260 head changed hands at $180.72 in Iowa Thursday. We were expecting cash prices to rise later this afternoon, especially with February live cattle futures closing at $185.60. The contract expires next Thursday. It’s rare to see a closing spread over $1.00 between cash and futures. This week’s cash trading was also likely delayed by the looming 2:00 pm CDT release of this afternoon’s USDA Cattle-on-Feed report. Analysts polled by Reuters expected a sharp drop in placements, down 11.6% from a year ago, which would mark the third month in a row with a year-over-year decline. USDA’s Cold Storage report will also be out this afternoon. The five-year average is a 2.9 million-lb. increase in beef stocks during the month.

The noon report today showed wholesale beef prices rose again, with Choice cutout up $1.42 to $301.21, while Select grade rose $1.61 to $287.42. Movement at midday was decent at 79 loads.

USDA today reported U.S. beef export sales of 12,600 MT for 2024, down 25% from the previous week and 34% from the four-week average.

Cattle traders and producers will be watching weather conditions in the Plains states next week that could impact cattle performance and animals getting to market. World Weather Inc. today said extreme high temperatures could reach the lower 90s in southern Oklahoma and the southeastern part of the Texas Panhandle Monday and Tuesday but then drop sharply. Winds will be particularly strong Tuesday with some gusts as high as 50 to 60 mph possible which could lead to blowing dust, said the forecaster.

30-day outlook: Dressed steer weights averaged a record 942 pounds per head just before Christmas, but dropped to just 909 pounds by late January. The mid-January arctic cold wave played a big role in the drop. However, unlike conditions in the wake of a similar dive in February 2021, when weights rebounded somewhat later that month. They also did so during the first week of February, rising 3 pounds to 912 pounds/head. Still, supplies of market-ready fed cattle look likely to remain tight during in the coming weeks, especially with retailers not raising retail beef prices since last fall.

90-day outlook: The major U.S. stock indexes this week hit more record highs. The U.S. economy is growing at a solid clip heading into springtime. Upbeat consumer confidence heading into outdoor grilling season bodes well for better demand for beef at the meat counter in the coming months. Given the early arrival of Easter this year (on March 31), there’s little reason to expect any deviation from strong grilling season demand again this year.

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 soybean meal needs covered in the cash market through February.

 

 

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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.