Livestock Analysis | July 29, 2022
Price action: August lean hog futures rose $1.525 to $120.65, up $1.95 for the week and the contract’s highest closing price since March 30. October lean hogs rose 90 cents to $97.225, the contract’s highest closing price since April 22.
5-day outlook: Nearby hog futures extended this week’s rally to the highest levels to four-month highs behind strong cash fundamentals. The cash market will continue to be the key near-term price influencer for futures. The CME lean hog index rose 85 cents to $120.58 (as of July 27), just $2.10 under last year’s $128.68, posted in mid-June. August futures closed today at a 7-cent premium to the index after trading at a discount much of the week. But with the lead contract expiring Aug. 12, focus is shifting to October and other deferred contracts, which are trading at sharp discounts to the nearby.
30-day outlook: The cash hog market appears poised to surpass year-ago levels as packers actively compete for hogs even as slaughter rates build, which indicates market-ready supplies are lighter than expected. This week’s slaughter was an estimated 2.291 million head, up 6,000 head from last week but down 22,000 head from the comparable week a year ago. The recent seasonal rally started later than usual and is lasting deeper into the year than normal, and pork demand appears to be holding up reasonably well despite high retail prices and recession concerns. Retail buying for Labor Day weekend features may underpin wholesale prices during the first half of August before purchases taper off. The national direct cash hog price tumbled nearly $11 Thursday and pork cutout values fell 22 cents early today from a 13-month high earlier this week, potentially signaling the cash market may be near a top.
90-day outlook: Based on seasonal patterns, hog futures typically decline from June-July highs into early September, rebound modestly, then move steadily lower into late fall and/or early winter. This year’s delayed rally could push back the usual subsequent decline to early autumn, though futures reflect a larger than normal seasonal decline in fall and winter contracts – December futures settled today at a $32.80 discount to August, for example. The traditional increase in second-half hog supplies probably will commence around mid-August but continued firm pork demand could limit the fall declines and/or lift deferred futures over the long-term. Recent softness in export demand bears watching, as the latest USDA-reported weekly export sales were down 16% from the average for the previous four weeks.
What to do: Be prepared to extend feed coverage when market bottoms are in place.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You are hand-to-mouth on corn-for-feed and soybean meal needs.
Price action: August lean hog futures rose $1.525 to $120.65, up $1.95 for the week and the contract’s highest closing price since March 30. October lean hogs rose 90 cents to $97.225, the contract’s highest closing price since April 22.
5-day outlook: Nearby hog futures extended this week’s rally to the highest levels to four-month highs behind strong cash fundamentals. The cash market will continue to be the key near-term price influencer for futures. The CME lean hog index rose 85 cents to $120.58 (as of July 27), just $2.10 under last year’s $128.68, posted in mid-June. August futures closed today at a 7-cent premium to the index after trading at a discount much of the week. But with the lead contract expiring Aug. 12, focus is shifting to October and other deferred contracts, which are trading at sharp discounts to the nearby.
30-day outlook: The cash hog market appears poised to surpass year-ago levels as packers actively compete for hogs even as slaughter rates build, which indicates market-ready supplies are lighter than expected. This week’s slaughter was an estimated 2.291 million head, up 6,000 head from last week but down 22,000 head from the comparable week a year ago. The recent seasonal rally started later than usual and is lasting deeper into the year than normal, and pork demand appears to be holding up reasonably well despite high retail prices and recession concerns. Retail buying for Labor Day weekend features may underpin wholesale prices during the first half of August before purchases taper off. The national direct cash hog price tumbled nearly $11 Thursday and pork cutout values fell 22 cents early today from a 13-month high earlier this week, potentially signaling the cash market may be near a top.
90-day outlook: Based on seasonal patterns, hog futures typically decline from June-July highs into early September, rebound modestly, then move steadily lower into late fall and/or early winter. This year’s delayed rally could push back the usual subsequent decline to early autumn, though futures reflect a larger than normal seasonal decline in fall and winter contracts – December futures settled today at a $32.80 discount to August, for example. The traditional increase in second-half hog supplies probably will commence around mid-August but continued firm pork demand could limit the fall declines and/or lift deferred futures over the long-term. Recent softness in export demand bears watching, as the latest USDA-reported weekly export sales were down 16% from the average for the previous four weeks.
What to do: Be prepared to extend feed coverage when market bottoms are in place.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You are hand-to-mouth on corn-for-feed and soybean meal needs.
