Hogs
Price action: December lean hog futures rose 45 cents to $81.275, near mid-range. For the week, December hogs were down 62 1/2 cents.
5-day outlook: The lean hog futures market remains trapped in a price downtrend and therefore the chart-based speculators will try to maintain control of the narrative next week. After their steep price downdrafts, the cattle futures markets appear to have stabilized, which is also a positive for hog futures. Still, deteriorating cash hog prices will continue to limit buying interest in lean hog futures. Lean hog futures’ present discounts to the cash index may somewhat limit selling interest in hog futures next week.
The latest CME lean hog index fell 33 cents to $91.53. Monday’s projected cash index price is down another 34 cents to $91.19. The national direct five-day rolling average cash price today is $87.94. The noon report today showed pork cutout value up $2.58 to $102.86, led by gains in butts, loins and picnics. Movement at midday was good at 270.68 loads.
30-day outlook: The end of the outdoor grilling season has pressured pork cutout value. However, as the holidays get closer, grocers will likely ramp up demand for pork as many consumers may choose to forego more expensive beef cuts and buy hams.
90-day outlook: This week’s apparently successful summit meeting between President Trump and Chinese President Xi Jinping is a longer-term positive for the U.S. pork industry. China is a major pork importer but has shunned U.S. pork purchases in recent months. The positive outcome from the summit may set the tone for more Chinese buying of U.S. pork in the coming weeks/months, and help to reverse the present price downtrend in lean hog futures.
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 November covered in the cash market.
Cattle
Price action: December live cattle futures fell $1.425 to $229.675, nearer the daily low and for the week down $4.25. January feeder cattle futures closed down $2.325 to $331.90, near mid-range and for the week were down $2.35.
5-day outlook: The cattle futures markets saw technical selling pressure to end the trading week. Bearish pennant patterns have formed on the daily bar charts for December live cattle and January feeder cattle futures. Still, prices are well up from their weekly spike lows, which begins to suggest near-term market bottoms are in place.
Active cash cattle trading started early this week. USDA at midday today reported steers and heifers fetched an average price of $230.02. That compares to last week’s average cash cattle trade at $237.89. The noon report today showed boxed beef cutout values mixed, with Choice-grade up 40 cents to $378.67, while Select-grade lost 29 cents to $359.23. Movement at midday was 77 loads. The Choice-Select spread is presently $19.44.
30-day outlook: Recent rhetoric from the Trump administration to lower cattle prices sent the bulls running for cover. Trader uncertainty became even keener due to the potential reopening of the southern U.S. border to Mexican cattle. While neither Argentine beef imports nor the reopening of the border to Mexican cattle will immediately flood the market, cattle bulls remain leery of the current spotlight on beef prices. However, consumer demand at the meat counter remains strong, driving wholesale values and ultimately packer margins higher. If this pattern holds, it will encourage larger slaughter volumes which will reduce fed supplies.
90-day outlook: Key for the cattle markets in the coming months will be consumer demand for beef remaining strong. The major U.S. stock indexes this week hit record highs. The Federal Reserve this week cut U.S. interest rates by 0.25%. U.S.-China trade tensions have eased and other trade deals are falling into line. These are bullish elements for stronger consumer confidence and still-solid consumer demand for beef at the meat counter in the coming months.
What to do: Cover your corn-for-feed needs in the cash market through November.
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 November covered in the cash market. Be prepared to make additional purchases if value prices continue.