Livestock Analysis | July 21, 2023

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: August lean hog futures rose 5 cents to $100.675 and nearer the session low. Prices hit a four-month high early today.

5-day outlook: It was another good week for the lean hog futures bulls, gaining nearly $5.00 and including Friday’s technically bullish weekly high close that set the table for more price gains early next week. Solid technicals and cash market fundamentals will likely continue to support upside price action in futures and cash. The CME confirmed Wednesday’s quote for the lean hog index at $103.60, up 30 cents from Tuesday. Thursday’s preliminary figure rose another 44 cents to $104.04. The discount August futures hold to the cash index suggests more upside for futures in the near term. The national direct 5-day rolling average cash hog price today is $102.99. The noon report showed pork cutout value rose another $3.29 to $118.39, led by gains of nearly $20 in bellies. Movement at midday was 117.80 loads.

30-day outlook: The next few weeks will be prime BLT season, which should continue to support bacon prices, especially as beef steak prices are at or near record highs at the meat counter. Potentially limiting gains in cash and futures in the coming weeks could be higher hog slaughter levels. Hog slaughter has been topped year-ago levels in four of the past five weeks, raising doubts about USDA projections for generally unchanged year-on-year slaughter rates during the second half of the year. The early-August onset of seasonally increasing hog supplies could end the rally in cash and futures.

90-day outlook: USDA Thursday reported U.S. weekly pork export sales of 19,200 MT for 2023 were down 22 percent from the previous week and down 28 percent from the prior 4-week average. China was the lead buyer at 5,300 MT. The recent decline in the U.S. dollar index to a 15-month low has made U.S. pork cheaper (in non-U.S. currency) on world trade markets, which may produce better U.S. pork sales abroad in the coming months.

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 all soymeal and corn-for-feed needs covered in the cash market through mid-August.

 

 

Cattle

Price action: Traders anticipating a summer decline in fed cattle prices actively sold live cattle futures again today. Nearby August cattle slid 30 cents to $180.025, while August feeder futures rallied 82.5 cents to $245.925. Those closing prices represented weekly losses of 15 cents and 72.5 cents, respectively.

5-day outlook: Cash cattle trading accelerated Thursday, with the five-area average surging to $186.74. That marked a weekly jump of $3.75. If we’re correct and the full-week average rises a bit farther, this week’s cash average would be the second highest on record (behind the week of June 8, which averaged $190.39). Wholesale prices were steady-higher, with choice cutout slipping 2 cents to $302.54 and select rising $1.88 to $276.59. The choice-select spread remains quite wide at $25.95. In normal circumstances we would probably look for grocers to back away from the wholesale market next Wednesday, but given their slow buying pace since Independence Day, we tend to doubt that pattern will hold. It’s possible they will buy actively as they prepare to feature beef for Labor Day weekend. We remain cautiously optimistic about next week’s prospects.

Traders expected today’s (7/21) Cattle on Feed report to state the July 1 large-lot feedyard population at 97.7% of the comparable year-ago level. That reflected anticipation of June placements 1.6% under year-ago, while marketings were seen falling well short (4.9%) of last year. The USDA stated the July 1 population at 11.204 milllion head, down 1.8% from last year, so the report holds negative implications for Monday’s opening. Last month’s feedlot placements easily topped expectations by increasing 44,000 head (2.7%) over year-ago. June marketings matched expectations for an approximate 5% annual drop, which both of those results looking negative for Monday’s opening.

The Cattle report stated the U.S. cattle population as of July 1 at 95.9 million head. That’s down 2.7 million head (2.7%) from year-ago. That compares to an average of survey estimates at 96.3 million indicating the current U.S. cattle population is even smaller than anticipated. The cow herd was stated at 38.8 million head, which fell 800,000 (2.0%) from the year-ago figure. This also fell 100,000 head below the 2014 low, thereby marking the lowest total ever recorded on the July report (dating back to 1976). The steer population rounded down to 97% of last year, with the 2023 calf crop of 33.8 million falling about 2% under last year. These numbers clearly indicate the U.S. cattle population is still being thinned, although it might show signs of bottoming next year. Furthermore, the results of the report have longer-term focus and likely won’t affect Monday’s futures open.  

30-day outlook: We still harbor suspicions that grocers will buy beef as actively next month as they did during August 2021, which powered choice beef cutout to its second-highest level on record. The fact that they kept a lid on retail beef prices through June, despite surging cash and wholesale costs, suggests they’re reluctant to abandon beef features this summer. If we are correct in this regard, cash cattle prices might top their June high next month, while choice cutout could challenge its 2021 top in the $348.00 area.

90-day outlook: Although similar years when cash cattle prices reached new highs in June have sometimes seen the bull market last into the November-December period, we harbor doubts on that score. Deferred feeder and fed cattle futures imply the current cattle/beef shortage will last into next spring. We worry that the large fed cattle premiums will spur increased feedlot placements this summer and fall, as well as creating a sense of complacency among producers. The resulting increase in cattle supplies in feedlots, along with laggardly marketings, have sometimes caused bear markets in the past. Still, we expect cattle and beef prices to remain relatively elevated over the next 90 days. 

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 all soymeal and corn-for-feed needs covered in the cash market through mid-August.

 

Latest News

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.

Timeline and Issues in Getting Baltimore Port Channel Reopened
Timeline and Issues in Getting Baltimore Port Channel Reopened

Exxon Mobil and SAF | Fed governor says ‘no rush’ to lower rates | Russia aids Cuba | Key USDA reports today

Cattle Strength Wanes | March 28, 2024
Cattle Strength Wanes | March 28, 2024

Japan works to support Yen, Eurozone cuts production forecast and the Biden Administration will repair Baltimore Bridge...

Ahead of the Open | March 28, 2024
Ahead of the Open | March 28, 2024

Corn, soybeans and wheat traded in tight ranges overnight, with grains showing relative strength into the break.