Livestock Analysis | March 15, 2024

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: Hog futures ended the week on a strong note, with nearby April leading the way higher. It jumped $1.90 to $86.925. That represented a weekly gain of $2.55.

5-day outlook: The cash hog market exhibited sustained strength this week, with the hog index officially adding 17 cents to reach $82.19 when Wednesday’s official quote was released this morning. Thursday’s preliminary figure added another 15 cents to $82.34. Moreover, pork prices continued climbing; after slipping Thursday afternoon, pork cutout rebounded to $94.19 at midsession Friday, which marks the second-highest quote for the first quarter of this year. This week’s slaughter also fell short of the year-ago total at 2.492 million head. The preliminary total at 2.479 million topped the week-prior figure by 23,000 head but fell 13,000 head or 0.5% below last year. We suspect the possibility of an annual reduction in hog supplies during spring played a big role in today’s futures surge. 

30-day outlook:  Grocers may curb their buying of pork cuts for grilling season during late March as they await the results of ham features for Easter dinner entrees. We think the arrival of Easter on March 31 clears the path for active retail features of pork chops, ribs, steaks and sausage for grilling season, with the bacon price outlook also appearing potentially strong, especially if hog supplies indeed fall short of expectations. We’ll learn more on the latter score when the USDA releases its quarterly Hogs & Pigs report on March 28. The stage seems set for a strong start to the traditional hog and pork rally through early spring.

90-day outlook: Again, the potential for a modest decline in hog supplies this spring could prove very supportive of the hog and pork outlook, since it would probably amplify the usual spring rally. Hog and pork prices routinely surge as strong grilling season demand meets seasonally declining hog supplies. For example, hog slaughter during the last week of June has averaged 140,000 head fewer than in the last week of March during the past 10 years. We also suspect pork belly prices could prove very strong this spring, especially if spring-summer hog supplies depart from their 2023 and early 2024 pattern of exceeding comparable year-ago levels. This optimism is also based upon the latest Cold Storage data, which showed ending-January belly stocks almost 10 million below year-ago.

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 corn-for-feed and soymeal needs covered in the cash market another month through April.

 

 

Cattle

Price action: Cattle futures rebounded from Thursday’s big losses, with nearby April live cattle rising 30 cents to $187.25. That represented a weekly decline of 35 cents. Meanwhile, expiring March feeder futures surged $1.80 to $249.275 and most-active April climbed 95 cents to $252.125. The latter quote marked a weekly drop of $1.975.

5-day outlook: Thursday’s big cattle and feeder breakdown likely reflected industry concerns about packer demand. Packers have recently made sharp reductions to their operational speeds due to tight market-ready fed cattle supplies and negative margins. Those big cutbacks, along with unremittingly mild weather conditions over the Great Plains, apparently caused a 10-pound increase in steer dressed weights during February. The latest reading of 919 pounds topped the comparable year-ago figure by 20 pounds per head, thereby suggesting feedlots are losing market currentness and are in danger of losing bargaining leverage with packers. However, neither those concerns, nor Thursday’s futures dive discouraged the cash market, which saw average steer prices surge to $187.89. Still, it would be easy to assume the cash rally will stall next week, especially if grocers curtail their buying for planned early-April beef features. Sustained wholesale strength, as was routinely seen this week, would favor continued cash gains.

30-day outlook:  Grocers will likely have gathered the bulk of their needs for planned early-April features by the middle of next week. Wholesale price action after next Wednesday will be closely watched. Big reductions at that point could set the stage for a broader seasonal setback, whereas sustained firmness would likely help bulls retain the technical and psychological advantage in the market. That would also seem to set the stage for sustained strength across the cattle and beef complex through mid-April. Traders will keep a very close eye on steer weights as well. Continued gains and/or only modest declines would probably indicate feedlots losing market currentness and greatly increase the chances of an early end to the usual seasonal cattle rally, as well as increased mid-to-late spring weakness.

90-day outlook: The spring cattle outlook likely depends upon two big factors. The first will be steer weights, if those don’t quickly turn downward and remain well above year-ago levels, the chance of the first quarter rally extending beyond mid-April will decline significantly. That would partially reflect increased beef production per head. But the main reason to expect a price downturn would be the accompanying shift of bargaining leverage from cattlemen to the packers. The other big factor will be the strength of consumer beef demand. If grocers continue holding the line on retail beef prices below last year’s highs, consumers seem likely to continue buying beef quite actively. However, if meat-case prices surge, beef demand could slump and exaggerate the potential downside facing the cattle and beef sector.

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 should have all corn-for-feed and soymeal needs covered in the cash market another month through April.

 

 

 

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Pro Farmer's Daily Advice Monitor
Pro Farmer's Daily Advice Monitor

Pro Farmer editors provide daily updates on advice, including if now is a good time to catch up on cash sales.