Hogs
Price action: December lean hog futures fell 32 1/2 cents to $84.025, near mid-range and hit a six-week low. For the week, December hogs were down $3.275.
5-day outlook: December lean hogs today saw a technically bearish weekly low close, which will further embolden the chart-based speculative bears early next week. However, the market is now short-term oversold, technically, which also argues for a corrective bounce early next week. Serious near-term technical damage has been inflicted to suggest a market top in hog futures is in place. Bulls are hoping lean hog futures’ discounts to the cash hog index will limit selling interest in futures next week.
The latest CME lean hog index fell 62 cents to $100.08. The index has dropped around $3.00 the past week. Monday’s projected cash index price is down another 65 cents to $99.43. The national direct five-day rolling average cash price today is $97.12. The noon report today showed pork cutout value up 85 cents to $103.49, led by gains in butts and ribs. Movement at midday was good at 202.65 loads.
30-day outlook: The U.S. stock market and most commodity markets got spooked today on eroding U.S.-China relations amid tariff and duties threats. Many stock market observers have been saying equities are over-valued. If consumer confidence starts to decline and with pork at the meat counter still a much more affordable source of protein than beef, better consumer demand for pork in the coming weeks would support rallies in cash hog, fresh pork and futures markets.
90-day outlook: Global demand for U.S. pork has been lackluster, especially from China. Today’s back-and-forth China-U.S. jabs at each other bodes ill for any pick-up in U.S. pork sales to China—the world’s largest consumer of pork.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
Feed needs: You should have all your soymeal needs covered through December in the cash market. For corn, you now have all needs through October covered in the cash market.
Cattle
Price action: December live cattle futures rose $2.625 to $242.525, near the daily high, closed at a contract high close and for the week were up $8.025. November feeder cattle futures gained $1.85 to $375.90, near the daily high, hit a contract/record high and for the week up $20.475.
5-day outlook: The live and feeder cattle futures markets early today saw some profit-taking pressure but in late trade the bulls once again turned on the gas. Improving cash cattle and fresh beef market fundamentals, as well as bullish charts, fueled this week’s surge in futures prices.
However, cattle futures bulls should beware that the general sell off in most of the raw commodity markets today, on news that President Trump cancelled his scheduled meeting with Chinese leader Xi and threatened more tariffs on China’s imports, could be a significantly bearish element for most raw commodity markets next week, including cattle futures.
Cash cattle trading turned more active today. USDA at midday today reported steers fetched an average price of $230.71 and heifers an average of $231.23. That compares to last week’s average cash cattle trade at $230.76. The noon report today showed boxed beef cutout values firmer again, with Choice-grade up $1.05 to $366.27, while Select-grade rose $2.67 to $347.00. Movement at midday was 82 loads. The Choice-Select spread is presently $19.27. An increase in movement of boxed beef this week indicates the recent price pullback spurred better retail demand as consumers continue to choose beef. Beef packer margins remain solidly in the red despite the recent improvement in boxed beef prices.
30-day outlook: Positive for the cattle markets in the coming weeks is seasonals that suggest lower cattle slaughter levels. Also, the latest USDA cattle-on-feed report reminds that cattle supplies in U.S. feedlots remain historically tight.
90-day outlook: Key for the cattle markets in the coming months will be consumer demand for beef remaining solid. The U.S. government shutdown has so far not rattled the marketplace or consumers, evidenced by the U.S. stock indexes this week hitting record highs. However, today’s stock market sell off on the rising U.S.-China trade tensions is at the least throwing a scare into the general marketplace. This matter will be closely watched in the coming months.
What to do: Get current with feed coverage. Carry all production risk in the cash market for now.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: For soymeal, you have full coverage in cash through December. For corn, you have all needs through October covered in the cash market. Be prepared to make additional purchases if value prices continue.