Livestock Analysis | March 8, 2024
Price action: Hog futures traded mixed to higher Friday, with the summer contract posting another round of modest gains, whereas nearby April and the deferred contracts slipped. April hogs ended the week at $84.375, down 15 cents on the day and $3.70 on the week.
5-day outlook: Traders are apparently anticipating short-term weakness across the hog and pork complex, with a resumption/acceleration of the seasonal rally possibly coming after Easter. These negative short-run ideas likely reflect expectations for a late-March setback in ham values when grocers have completed their wholesale ham purchases for planned Easter dinner features. Relatively small ham stockpiles suggest the expected dip may not prove all that severe or long-lasting, so we’re somewhat more optimistic about the short-term outlook than futures imply. We also expect strong consumer demand during the spring grilling season, which should also prove quite price supportive. Much depends upon forthcoming hog and pork supplies. This week’s kill at 2.456 million head fell 2% below the comparable year-ago figure after last week’s figure topped last year by just 1%. If these numbers presage a shift in line with December USDA numbers implying unchanged production versus spring 2023 totals, this could prove quite supportive of the hog/pork price outlook.
30-day outlook: The hog and pork markets may trade rather erratically during the run-up to Easter on March 31. We’ve already mentioned the potential shifts in ham demand and prices. The other pork cuts seem likely to benefit from burgeoning grocer and consumer demand for the various grilling cuts (i.e. loins = chops, butts = steaks, ribs= ribs, trimmings = sausage). Pork belly stocks are also down about 6.0 million pounds from last year, which might also give the complex a boost as BLT season nears. We see little reason to expect significant cash or wholesale weakness in the short-run, especially if this week’s slaughter reduction is a harbinger of flat-to-reduced spring hog supplies versus year-ago levels.
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 March.
Price action: April live cattle futures closed down $1.125 at $187.60 and nearer the session low after hitting a 4.5-month high early on. For the week, April cattle lost 85 cents. May feeder cattle futures lost $1.70 to $256.75 and near the daily low. For the week, May feeders fell $3.425.
5-day outlook: Today’s downside price action in the cattle futures markets and closes at or near the weekly lows suggest the bulls are tired, which could set up some follow-through technical selling interest early next week. However, recent history shows the cattle market bulls are resilient and price uptrends are still in place on the daily bar chart.
Cash cattle and beef market fundamentals remain on firm ground. USDA reported active trading Thursday, with the bulk of the trading taking place between $185.00 and $186.00. Thursday’s weighted average for steers was $185.42, which brought the four-day average coming in at $185.15. It appears all the trading was in the northern Plains, so the weekly average will probably decline a bit since packers are probably going to try very hard to keep southern trading in the $184.00-$185.00 range at most. Today’s noon report showed wholesale beef cutout value rose again, which Choice-grade up 35 cents at $306.96, while Select grade gained 63 cents to $296.89. Movement at midday was 67 loads. The Choice-Select spread is $10.07.
30-day outlook: Beef production took a big jump following the Christmas/New Year holidays and early-January packing-industry cutbacks due to severe winter weather. Even with the tightness of market-ready cattle supplies, retailers have been holding the line on passing on higher prices to consumers ahead of the post-Easter rise in consumer grilling demand. Such suggests cash cattle price gains into April are likely. Then, cattle slaughter and beef production have historically tended to rise and undercut prices into summer.
90-day outlook: The Labor Department’s February employment report showed the US economy added 275,000 jobs in February 2024, beating forecasts. However, the unemployment rate up-ticked to 3.9%, above expectations of 3.7%, despite strong jobs growth. Today’s report and recent data puts the U.S. economy in a sweet spot that suggests the Federal Reserve can lower interest rates in the second half of this year. Lower interest rates and a booming U.S. stock market suggest continued strong consumer demand for beef at the meat counter. With grilling season fast approaching, look for cattle and beef markets to remain underpinned by good demand and still-tight supplies of market-ready animals.
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 March.
