Hogs
Price action: February lean hog futures fell 57 1/2 cents to $85.30, nearer the daily high and for the week down 85 cents.
5-day outlook: The lean hog futures market today saw mild end-of-the-week profit taking from the shorter-term traders after posting good gains Thursday. A weakening CME lean hog index and a dip in cash hog prices also weighed on futures today. Still, the bullish near-term chart posture for lean hog futures should support some more speculator buying interest next week. Lean hog futures’ premium to the CME lean hog index remains a positive element for the futures market.
The latest CME lean hog index is down 27 cents to $80.98. Monday’s projected cash index price is down 13 cents to $80.85. The national direct five-day rolling average cash price today is $68.56. The noon report today showed pork cutout value up $4.94 to $95.73. Movement at midday was 193.25 loads.
30-day outlook: Still historically elevated beef prices at the meat counter are likely to continue to see substitution demand for pork and move more consumers to purchase less-expensive pork cuts at the meat counter. Pork cutout values have faced volatility lately, driven by large swings in primal bellies, though consumer demand is strong, which underscores the February futures premium over cash.
90-day outlook: Seasonal factors suggest hog slaughter levels will decline into spring, which will be price-friendly for the cash hog and lean hog futures markets for the next few months.
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 March in the cash market. You should also have corn-for-feed needs purchased through February. Be prepared to make additional purchases.
Cattle
Price action: February live cattle futures fell $1.55 to $233.725, nearer the daily low. For the week, February live cattle fell $2.275. March feeder cattle futures lost $3.025 to $354.70, nearer the daily low. For the week, January feeders gained $1.75.
5-day outlook: Today’s technically bearish weekly low closes in February live cattle and March feeders sets the table for some follow-through, chart-based selling pressure early next week. Weaker boxed beef prices at noon and near-steady cash cattle trading this week leaned in favor of the bears today.
More active cash cattle trading late this week saw USDA today reporting steers averaging $231.42 and heifers averaging $231.96. Those numbers are close to last week’s average cash cattle trade reported by USDA at $231.68. The noon report today showed boxed beef cutout values lower, with Choice-grade down $1.55 to $355.24, while Select-grade lost 62 cents to $351.44. Movement at midday was 86 loads. The Choice-Select spread is presently $3.80.
30-day outlook: While cash cattle trade has notched a series of gains in recent weeks, packer margins have suffered as boxed beef values have eroded a bit. Consolidation in the processing sector will begin this month as packers adjust to still-tight cattle supplies in feedlots. While efficiencies will increase with the closure of a Tyson plant and downsizing of another, it will undoubtedly have a ripple effect on feedlots and feedyards in those areas. The 600-pound bullish gorilla in the room for the cattle markets remains historically very tight cattle supplies in feedlots, with no sign of that shortage ending any time soon.
90-day outlook: Retailers still anticipate strong consumer demand for beef well into the new year, despite historically high beef prices at the meat counter. Consumer confidence remains generally upbeat as the Federal Reserve is likely to make at least two interest rate cuts this year.
What to do: Cover corn-for-feed needs through February in the cash market. Be prepared to make additional purchases.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: For soymeal, you have full coverage in cash through March. You have corn-for-feed needs covered through February as well. Be prepared to make additional purchases if value prices continue.