Livestock Analysis | October 13, 2023
Advice: We advise livestock producers to cover all corn-for-feed and soymeal needs in the cash market through October. Be prepared to extend further coverage if the markets indicate sustained price rallies.
Price action: Hog futures slipped to end the week, with the October contact going off the board at $81.925, down 17.5 cents, at noon. Nearby December fell 60 cents to $69.50. The closing price marked a weekly drop of $4.275.
5-day outlook: Next week traders will likely be anticipating a continuation of the late cash and wholesale weakness seen this week. After having bounced slightly Tuesday and Wednesday, the hog index turned lower again yesterday. The CME confirmed Wednesday’s preliminary figure at $82.42, up two cents from Tuesday, but Thursday’s USDA data implied an index value of $82.11, down 31 cents from Wednesday. And after having surged at noon Thursday, pork cutout turned lower in afternoon trading and continued sliding (down $1.29) to $90.85 at midsession Friday. This week’s hog slaughter total, estimated at 2.609 million head by the USDA, represents a 2.1% annual increase, thereby suggesting the USDA’s implied 1% annual increase in fall hog supplies will prove somewhat accurate. That seems to bode rather ill for short-term hog and pork values as well.
30-day outlook: As is very often the case, hog and pork values are expected to decline during late October and early November. That pessimism reflects the usual seasonal increase in hog supplies, as well as a routine reduction in consumer demand for most pork cuts (other than hams) during autumn. Deeply discounted futures imply the seasonal downtrend in cash and wholesale values will prove comparatively large, since nearby December futures are priced below the late-2021 cash market low of $70.04 and far below last year’s late low at $78.74 (although the hog index eventually fell to $71.20 in April of this year). We still suspect reduced retail pork prices are prompting stronger consumer demand for pork, which may limit the anticipated drop during the weeks ahead.
90-day outlook: Current turkey production is reportedly running well ahead last year’s rate, which at first glance suggests spillover downward pressure upon ham prices during the year-end holiday season. However, whole turkey stocks came up about 6% below year-ago on August 31. Moreover, recent outbreaks of avian influenza around the country threaten to exacerbate the situation. That may make hams more attractive to grocers and consumers, which given the comparative shortage of hams, might go far toward supporting the market late in the year. Much depends upon grocery store prices. After having maintained retail hams at relatively high levels in late 2022 and through early 2023, grocers have apparently given those costs a relative trim in recent weeks.
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: NEW ADVICE -- You should cover all corn-for-feed and soymeal needs in the cash market through October.
Advice: We advise livestock producers to cover all corn-for-feed and soymeal needs in the cash market through October. Be prepared to extend further coverage if the markets indicate sustained price rallies.
Price action: December live cattle futures fell $1.05 to $186.75 and near the session low. For the week, December live cattle rose 7 1/2 cents. November feeder cattle futures lost $2.00 to $251.575, near the session low and for the week up 70 cents.
5-day outlook: The cattle futures markets on Friday saw some profit taking by the shorter-term traders, following good gains posted Wednesday and Thursday. Next week cattle market traders will focus on the risk-appetite tenor of the general marketplace, knowing that higher anxiety due to the Middle East crisis that appears to be escalating may well limit buying interest in cattle futures. Cash cattle market fundamentals remain overall friendly for prices. Cash cattle trading Thursday saw packers raise their bids, with mostly $1.00 higher prices, though some traded as much as $3.00 higher. The Monday-Thursday average posted a weekly rise of $1.49 to $184.14. Today’s noon report showed Choice grade boxed beef prices rose 2 cents to $301.21, while Select grade gained 49 cents to $275.45, taking the Choice-Select spread to $25.76. The seasonally wide Choice-Select spread suggests still-tight supplies of market ready cattle in the feedlots. Movement at midday was light at 49 loads. Traders will closely scrutinize next Friday’s monthly USDA cattle-on-feed report.
30-day outlook: This week’s early dip below $300.00 in Choice grade beef cutout value prompted better buying from retailers. Active buying by packers the past two weeks, despite a mild rise in cattle slaughter rates from mid-summer, is also a near-term positive element for the cattle and beef markets. That also implies tight supplies of market-ready animals, suggesting limited downside for the cattle and fresh beef prices in the coming weeks.
90-day outlook: USDA today reported weekly U.S. beef export sales of 9,000 MT for 2023, which were down 32% from the previous week and off 29% from the four-week average. A strong dollar on the foreign exchange market is likely working to limit overseas demand for already high-priced U.S. beef. U.S. sales abroad need to improve in the coming months if cattle and beef prices are going to remain historically elevated. Nevertheless, beef demand from domestic consumers seemingly remains robust despite record-high grocery store prices. This suggests continued support for the cash and wholesale markets.
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: NEW ADVICE -- You should cover all corn-for-feed and soymeal needs in the cash market through October.
