Hogs
Price action: October lean hog futures rose 97 1/2 cents to $90.10, nearer the daily high and for the week fell 57 1/2 cents.
5-day outlook: Today’s price action saw some corrective buying following two days of selling pressure. A price uptrend remains in place on the daily bar chart for October lean hogs, but the bulls need to show more power soon to keep it alive and to keep the speculative bears at bay. Hog futures prices next week will likely continue to be impacted, to at least some degree, by price action in the cattle futures markets.
Cash hog and pork market fundamentals have deteriorated a bit this week. However, the latest CME lean hog index is up a nickel to $109.83 as of Aug. 13. The national direct five-day rolling average cash hog price quote today is $109.67. The noon report today showed pork cutout value rose a solid $5.68 to $120.86, on gains in all cuts. Movement at midday was strong at 301.36 loads.
30-day outlook: Hog slaughter continues to trail the seasonal norm. However, weekly totals should rise notably into September, which likely translates into fading cash hog market fundamentals. However, consumers could ramp up pork purchases into the fall and winter months, as substitution demand for pork may get stronger amid elevated beef values at the meat counter.
90-day outlook: Global demand for pork will be a wild card in the coming months as trade negotiations are drawn out, especially between the U.S. and China. Big discounts in deferred lean hog futures contracts, compared to the CME cash hog index, suggest hog traders may be thinking about the possibility of an expanding U.S. hog herd following a bumper corn crop to be harvested this fall.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 September in the cash market, with half coverage for October, November and December. For corn, you now have all needs through October covered in the cash market.
Cattle
Price action: August live cattle futures rose $2.90 to $236.25, nearer the session high and for the week up $3.70. August feeder cattle futures gained $5.75 to $346.15, near the daily high and on the week up $6.75.
5-day outlook: Today’s technically bullish weekly high closes in August live and feeder cattle futures again showed the bulls’ keen resilience after Thursday’s sharp losses. However, the choppy, more volatile cattle futures trading action at higher price levels recently is one technically bearish warning signal of topping processes. However, cash cattle and beef market fundamentals are still overall bullish. Live cattle futures discounts to the cash market have limited selling interest recently. Rising wholesale boxed beef values this week remind of the tight beef supplies as retailers look to secure beef supplies for Labor Day holiday features.
Cash cattle trading turned active late this week, with USDA at midday reported steers fetched an average price of $242.64 and heifers averaged $242.59. Last week’s average cash cattle trading price was $242.01. The noon beef report today showed cutout values higher, with Choice-grade soaring $6.02 to $399.81 and Select-grade up $1.23 at $368.11. Movement at midday was good at 77 loads. The Choice-Select spread widened to $31.70.
30-day outlook: Peak outdoor grilling season will continue to wind down into late summer. Cattle slaughter also typically starts to increase in August. Bulls are hoping continued good consumer demand at the meat counter will keep wholesale beef values elevated. 90-day outlook: A surprisingly weak U.S. jobs report for July and some unexpectedly hot producer price inflation for July have the attention of the marketplace, and if downbeat data continues it will grab the attention of U.S. consumers. If consumer confidence starts to fade it will be difficult for the cattle and beef markets to remain at elevated price levels. However, if those two important economic reports for July were an anomaly and if the U.S. stock and financial markets sail through September and October with no major headwinds, consumer demand for beef would not likely be significantly dented.
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 July, with half of your needs for August, September, October, November and December covered in cash. For corn, you have all needs through August covered in the cash market, with half of your needs for September and October covered in cash.