Hogs
Price action: October lean hog futures fell $1.15 to $82.30, near the daily low for the week up 40 cents.
5-day outlook: The hog futures market saw profit-taking from the shorter-term spec traders today, heading into the three-day weekend. The bulls still had the slightly better week as recent technical signals still suggest a near-term market bottom is in place.
The USDA noon pork showed cutout value was up $0.14 at $91.26, led by gains in bellies. Movement at midday was 148.31 loads. The latest CME lean hog index is up 23 cents to $91.08. Monday’s projected CME index price is down 54 cents at $90.54. The national direct five-day rolling average cash hog price quote for today is $89.38.
30-day outlook: Short-covering strength led October futures from the recent range of sideways consolidation, which led to a more favorable technical posture. However, the cash side is a two-speed market – physical hogs and the CME lean hog index remain firmer than the board, while cutout at current levels fails to confirm those values. While resilient on the surface, pork cutout has been jumpy due to thin negotiated trade. Weakness in hams and bellies has been a drag, leaving packers with only modest margins. But processors continue to purchase cheaper hogs, keeping slaughter stable as demand fades seasonally.
90-day outlook: The shake-up in the cattle industry, with recent plant closures, Trump administration proposed rule changes on smaller operations selling beef, and wanting more beef imports, have combined with historically tight cattle supplies, are likely to continue to impact the pork industry and hog futures markets in the months ahead. Hog traders can argue the situation could be bullish for hogs, given historically elevated beef prices at the meat counter meaning better substitution demand for pork. Tighter expected pig supplies, resilient pork export demand and the usual holiday-season lift may spark a rebound in cash and futures this fall.
What to do: Get current with feed coverage.
Hedgers: You currently have all risk in the cash market.
Feed needs: You have corn-for-feed and soymeal needs covered through September in the cash market. Be prepared to make purchases if value prices continue.
Cattle
Price action: October live cattle futures fell $1.35 to $212.95, near mid-range and for the week up $1.225. November feeder cattle futures lost $0.575 to $314.725, near mid-range and for the week up $4.80.
5-day outlook: The cattle futures markets today saw modest technical selling pressure heading into a three-day weekend as both markets remain in price downtrends on the daily bar charts. October futures’ discount to the cash cattle market may work to limit the downside in futures next week.
USDA at midday today reported active cash cattle trading this week at lower money, with steers averaging $217.91 and heifers $218.14. The agency Monday reported average cash cattle trading last week at $219.25. The noon report today showed mixed boxed beef prices, with Choice grade down $1.87 at $375.03 and Select grade up $3.51 at $354.23. Movement at midday was 69 loads. The Choice-Select spread is presently plus $20.80.
30-day outlook: Cash cattle prices continue to slide as live as boxed beef prices cool and feed costs rise. The cheaper cattle bids have restored beef packer leverage after months of deep losses. Estimated packer margins moved back into the black in late August and jumped notably as cash fell faster than the cutout. That margin recovery has encouraged packers to push slaughter and work through the feedlot backlog, putting more beef on the market even as the cow herd remains historically small. Demand is still decent, but softer consumer sentiment and talk of extra beef imports have capped the old tight-supply bid.
90-day outlook: The stock and financial markets are just entering into what are historically the two most turbulent months of the year. Any big wobbles in the stock, financial or currency markets could dent consumer confidence, which may produce less demand for beef at the meat counter. Today’s stronger U.S. jobs report put higher odds of the Federal Reserve raising interest rates at its mid-September FOMC meeting. If that comes to fruition, higher interest rates would also be a ding to consumer attitudes. Demand for beef could also be crimped with gasoline prices staying close to, or above, $4.00 a gallon at the pumps.
What to do: You have corn-for-feed and soymeal needs covered through September in the cash market. Be prepared to make additional purchases.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: You have corn-for-feed and soymeal needs covered through September in the cash market. Be prepared to make purchases if value prices continue.