Hogs
Price action: December lean hog futures fell $1.675 to $77.80, near the session low and for the week down 70 cents.
5-day outlook: The lean hog futures market today saw renewed technical selling as the near-term technical posture remains firmly bearish. December lean hogs remain in a price downtrend and the chart-based speculative bears will continue looking to play the short side next week. Falling cash hog prices will also continue to favor the hog bears until the cash market bottoms out. Lean hog futures’ present discounts to the cash index may work to limit selling interest in hog futures next week.
The latest CME lean hog index is down another 56 cents to $85.71. The national direct five-day rolling average cash price today is $74.35—down around $9.00 from last Friday’s quote. The noon report today showed pork cutout value up $2.59 to $92.80, led by gains in bellies and picnics. Movement at midday was good at 254.15 loads.
30-day outlook: Holiday demand for hams may be one factor that helps to stop the slide in cash hog and hog futures prices. However, longer-term charts for lean hog futures show prices are still in the upper half of the historical trading range dating back to the 1970s. With the highly cyclical nature of lean hog futures price action, we would not be surprised to see more downside price pressure in hog futures in the coming weeks.
90-day outlook: Recent U.S. trade deals have hog producers hopeful for better global demand for U.S. pork in the coming months. China is a major pork importer, and U.S-China relations are presently on the upswing. That’s a positive for the hog and pork futures markets. Now that the U.S. government has opened back up, hog traders are anxious for USDA to resume reporting its weekly U.S. export sales data for pork, as well as cold storage data.
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 27 1/2 cents to $214.45, nearer the daily high after hitting a 4.5-month low early on. For the week, December live cattle were down $4.70. January feeder cattle futures closed down $2.15 at $314.225, nearer the daily high and hit a 4.5-month low. For the week, January feeders were down $6.325.
5-day outlook: The cattle futures markets saw stronger selling pressure early in the session, due in part to news the U.S. was dropping import tariffs on several Brazilian food products, including beef. However, the bears then appeared to have become exhausted as prices somewhat rebounded from the daily lows. The live and feeder cattle futures markets bulls still have steep hills to climb to turn the bearish technical tide.
Active cash cattle trading late this week saw USDA reporting at midday today steers fetched an average price of $217.57 and heifers $218.55. That is well down from last week’s average cash cattle trade reported by USDA at $225.06. The noon report today showed boxed beef cutout values up, with Choice-grade gaining 33 cents to $371.61, while Select-grade rose $4.24 to $358.42. Movement at midday was good at 105 loads. The Choice-Select spread is presently $13.19.
Cattle futures traders this afternoon will get their first USDA monthly cattle-on-feed report since September 19. Today’s COF data was expected by analysts to show the total number of U.S. cattle on feed as of November 1 at 97.9% of last year. October placements were expected to be around 92.2% of last year and October marketings at 92.5% of last year. This afternoon’s COF report was the first one after the U.S. government shutdown.
30-day outlook: Despite the recent beat-down in cattle futures prices, cattle producers and traders need to keep in mind U.S. consumer demand for beef remains robust, with better demand likely in the coming weeks due to beef cuts being selected for holiday meals. This should keep a floor under cash cattle prices, support wholesale boxed beef values and beef packer margins in the coming weeks, or longer.
90-day outlook: U.S. Consumer confidence will be an important element for cattle markets in the coming months. Good consumer confidence in recent months has led to better demand for beef at the meat counter. The wobbly and more volatile U.S. stock indexes recently is not a good signal for consumer confidence remaining high. In the coming months, we believe the trajectory of the U.S. stock market will be a main influence on consumer confidence and in turn demand for beef at the meat counter.
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.