Livestock Analysis | July 7, 2023

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: August lean hogs fell $1.975 to $95.15 but for the week gained $2.55.

5-day outlook: The lean hog futures market late this week fell victim to some routine profit taking after August futures on Thursday hit a 3.5-month high. However, the overall technical posture remains bullish and cash market fundamentals are still sound. The latest official CME hog index quote for Wednesday rose $1.39 to $96.07, confirming the preliminary figure. The initial calculation for Thursday put the index another $1.36 higher at $97.43. The five-day national direct cash hog quote today was $99.41. The noon pork report today showed cutout value was up $2.26 to $107.26, led by gains in bellies. Movement at midday totaled 144.68 loads.

30-day outlook: It’s likely the hog and pork markets will be supported in the coming weeks as it appears retailers have started featuring more pork cuts, what with beef prices still at historically elevated levels. A bit worrisome is that hog slaughter levels the past couple weeks have been slightly above year-ago levels. However, hog weights are down from last year. Seasonal pork belly strength is likely to persist into August, which will likely keep a floor under the fresh pork market.

90-day outlook: USDA this morning reported U.S. pork sales of 26,000 MT for 2023, down 3% from both the previous week and four-week average. It’s been a bit disappointing that Chinese purchases of U.S. pork have not been more pronounced, given that country’s problems with African swine fever outbreaks in recent months. The U.S. dollar index had been rallying the past few weeks but took a nose-dive today. If the USDX sees a price downtrend develop, such would help to make U.S. pork more competitive on the world trade markets.

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 should have half of your soymeal needs covered for both July and August in the cash market. You are hand-to-mouth on corn-for-feed needs.

 

 

Cattle

Price action: Cattle futures rebounded sharply Friday, with August live cattle futures jumping $2.425 to $177.00 and August feeders leaping $3.15 to $245.425. These closing quotes represented weekly losses of 17.5 cents and $2.15, respectively.

5-day outlook: Cattle traders apparently expected the early-summer slide in fed cattle values to continue this week. Early-week cash trading pointed in that direction, registering modest week-to-week losses through Wednesday. However, trading in the more-tightly supplied northern states began yesterday, with the indicated gains pulling the four-day average up to $180.70, up 29 cents from the comparable week-prior result. In fact, those gains and today’s bullish futures reaction will almost surely push the full-week average even higher. We suspect cash prices will edge upward again next week, especially if we are correct in thinking active grocer buying for beef features the first weekend in August will also boost wholesale prices. That actually might be required to power fresh cattle gains, since choice and select values fell so sharply this week.

30-day outlook: As indicated previously, former years when the cash cattle market has surged to fresh highs in June have commonly seen prices move even higher later in the summer or in mid-to-late autumn. Indeed, December futures are already projecting as much. We suspect such a follow-through advance might happen sooner than later, thinking grocers will be inclined to keep featuring beef aggressively through Labor Day, rather than later in the year. That is, the cattle market surge to record highs, along with the temporary rise in choice beef values to their third-highest level on record, is likely to cause grocers to raise retail beef prices commensurately. If that happens quickly, the chances of the cash and wholesale markets driving to fresh highs diminish, whereas a delayed boost in consumer prices seemingly leaves the door open to a late-summer surge akin to the one seen in July and August of 2021.

90-day outlook: Big corn market losses in response to improved Corn Belt rains and the huge upward revision to the USDA’s corn plantings estimate have greatly reduced the cost of feed, which in turn has sparked fresh feedlot demand for replacement yearlings. This seemingly justifies the huge premiums built into feeder futures. But it also implies the usual seasonal surge in the feedlot population could be amplified this fall, which in turn suggests fed cattle and beef supplies will climb later in the year. If feedyard managers keep moving fed cattle as quickly as possible, that may keep the bull market intact. But laggardly fed cattle marketings, and building market-ready supplies of those animals, hold the potential to trigger a bear market later this year, especially if inflated retail beef prices curb consumer demand.

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 should have half of your soymeal needs covered for both July and August in the cash market. You are hand-to-mouth on corn-for-feed needs.

 

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