Livestock Analysis | March 28, 2024

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: Hog futures continued their seasonal advance again Thursday, with nearby April surging 52.5 cents to $86.625. Most-active June skid 15 cents to $101.45, but today’s close represented a $1.75 weekly advance.

5-day outlook: Next week’s market action will be greatly affected by the results of this afternoon’s (2:00 pm CDT) release of the USDA’s quarterly Hogs & Pigs report, since it will hold major implications for spring and summer hog supplies. Still, this week’s developments indicate considerable market strength and a likely continuation of the advance next week. The CME confirmed Tuesday’s 56-cent rise in its cash index to $84.25. Moreover, today’s USDA data implies Wednesday’s quote will climb another 39 cents to $84.64. Wholesale prices also remained strong, with the 71-cent rise to $94.77 leaving pork cutout just 97 cents under Monday’s 2024 high of $95.74. Pig weights also dipped below the comparable year-ago reading last week, indicating the supply of market-ready hogs is tightening. See “Evening Report” for results and commentary concerning the Hogs & Pigs report.

30-day outlook: Again, the Hogs & Pigs report will hold big implications for April hog supplies. Industry estimates suggest the report will state short-term pig numbers slightly below year-ago levels. Given the fact that weekly slaughter totals have routinely topped year-ago levels (9 of 12 weeks) since Jan 1, this could prove quite supportive of April price prospects. Anecdotal reports also point to active pork featuring in grocery stores this week, which should boost clearance and potentially spur already-strong demand.

90-day outlook: The cash hog market routinely rallies strongly through much of the second quarter. That not only reflects surging consumer demand for the various grilling cuts (i.e. pork chops, steaks, ribs and sausage) as well as improving wholesale demand for bacon ahead of BLT season, the rally is also powered by a significant seasonal reduction in spring hog supplies. We see little reason to doubt such a rally will occur again this year. Indeed, given the strength of pork demand during the first quarter, as best reflected by the February drop in pork stockpiles (whereas the 10-year average implied a 34-million pound monthly rise) despite February pork production posting a 10% (214 million pounds) annual increase. For this reason, we’re inclined to expect the spring cash market rally to exceed historical norms. Whether it will justify the sizeable premiums already built into summer futures is open to question.

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: June live cattle futures rose $1.575 to $180.25 and near the session high. For the week, June cattle fell $2.65. May feeder cattle futures gained 42 1/2 cents to $248.70, nearer the session high and for the week down $5.075.

5-day outlook:  The cattle futures bears had the better holiday-shortened week, which means the bulls need to step up and show power early next week to avoid more significant near-term technical damage. Cash market fundamentals remain relatively sound even though the cash cattle and Choice-grade beef markets turned lower week. Cash cattle trade as of Thursday at noon remained light, though additional negotiations have brought the cash average to $185.47 so far this week, sharply lower than last week’s record high. The noon report today showed wholesale beef cutout values mixed, with Choice dropping 28 cents to $308.30, while Select rose $2.68 to $301.11. Choice beef has dropped over $5.00 since March 21, signaling a short-term top is in place. On the positive side, movement at midday was good at 88 loads, while the Choice-Select spread narrowed to $7.19.

30-day outlook: Last week’s USDA Cattle on Feed report triggered this week’s drop in cattle futures prices. February placements topped market expectations and marketings were relatively small. The large increase in steer weights last month implied market-ready feedlot supplies have increased. The cash and fresh beef price drops may continue over the next few weeks, but we don’t expect a repeat of the sustained losses seen last fall. Choice beef prices have risen lately and history suggests they’ll resume climbing into mid-May due to better consumer demand.

 90-day outlook: While recent weather over much of the U.S. has been cooler to much cooler than normal as spring gets under way, warmer weather is around the corner and that means better consumer demand for beef in the coming months as the grilling season begins and summer holidays approach. Also, the major U.S. stock indexes are near their recent record highs, which suggests consumer attitudes are upbeat. That likely also means better demand for America’s favorite red meat.

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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