Hogs
Price action: October lean hog futures fell $0.80 to $78.10, near the daily low, hit a 15-month low, and for the week were down $3.425.
5-day outlook: The hog futures market saw another dreadful week, including today’s technically bearish weekly low close. Recent heavy profit-taking and weak long liquidation from the shorter-term spec traders has the bulls running for cover. The sell offs in the cattle futures markets this week are also bearish for hog futures.
The USDA noon pork report today showed cutout value was down $0.86 at $86.68, led by losses in butts and hams. Movement at midday was 157.75 loads. The latest CME lean hog index is down 79 cents to $85.02. Monday’s projected CME index price is down $1.00 at $84.02. The national direct five-day rolling average cash hog price quote for today is $84.14.
30-day outlook: Lean hog futures have fallen to their lowest level in more than a year as wholesale pork pork values dropped to multi-year lows. The CME cash hog index also slid to a seven-month low. Hog slaughter has outpaced year-ago levels and average hog weights have edged higher, leaving the market with ample pork supplies. Meanwhile, ample chicken supplies have provided consumers a cheaper alternative protein source at the meat counter.
90-day outlook: U.S. pork exports remain a bright spot for the industry, but have not been strong enough to stabilize cash and futures prices in the near term. Bullish hog traders can still argue that historically elevated retail beef prices at the mean better substitution demand for pork—especially with retail gasoline prices rising above $4.25 a gallon and the Federal Reserve raising interest rates this week, both of which could sap consumer confidence and prompt better demand for more economical pork cuts at the meat counter.
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 rose $0.275 to $215.925, nearer the daily high and for the week down $3.75. November feeder cattle futures lost $0.65 to $318.00, near mid-range and for the week down $10.175.
5-day outlook: The cattle futures markets bears had a good week, including a technically bearish weekly low close in November feeders today. The near-term technical postures for both markets have deteriorated the past weeks, which has the speculative bulls mostly standing on the sidelines.
USDA at midday today reported more active cash cattle trading late this week, with steers and heifers averaging $222.17 and heifers $222.32. The agency Monday reported average cash cattle trading last week at $222.82. The noon report today showed mixed boxed beef prices, with Choice grade down $0.82 at $371.33 and Select grade up $1.82 at $353.70. Movement at midday was 65 loads. The Choice-Select spread is presently plus $17.63.
Traders were awaiting this afternoon’s monthly USDA cattle-on-feed report, which is expected to show an up-tick in cattle on feed but a downtick on new placements and marketings.
30-day outlook: Mixed to lackluster boxed beef trade has failed to keep pace with firmer cash cattle, leaving packer demand in question and prompting futures traders to take a more cautious stance. Rising input costs, especially record-high diesel and higher interest rates, also weigh on feedlot margins and bids for replacement cattle. While near-term supplies remain snug, traders will continue to weigh imports and consumer demand.
90-day outlook: The stock and financial markets have trended sideways to lower the past month. September and October are historically the two most turbulent months of the year for stock and financial markets. Any bigger setbacks in the stock indexes would likely dent consumer confidence, which may produce less demand for beef at the meat counter. This week’s FOMC interest rate hike and recent inflation readings that are still running warm are not good developments for better consumer confidence. Also, demand for beef could also be crimped with gasoline prices averaging around $4.25 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.