Hogs
Price action: June lean hog futures slid 40 cents to $98.30 and ended the week down $2.025.
5-day outlook: Lean hogs opened lower but saw little followthrough selling pressure today as prices have been supported by firming cash fundamentals. Bulls struggled to garner much of a footing this week despite bullish developments in fundamentals. Pork cutout firmed above $100 and has stabilized above that mark, rising 73 cents to $101.00 at midsession today as all cuts except hams posted gains. That has helped boost cash hog prices as well as shift sentiment to favor the bulls in the past week. Strength could be expected next week as June futures are not holding much of a premium to the cash market, but persistent selling pressure can’t be ruled out. If additional selling persists, the downside is likely to at least be somewhat limited.
30-day outlook: This afternoon’s Cold Storage report will detail frozen pork stocks at the end of April. The five-year average is a 21.7-million-lb. increase in pork stocks during the month. If demand was more than normal, it could point to a shift in consumer spending habits amid uncertainty regarding inflation and the economy amid ongoing tariff talks. If demand is stronger than usual, it could continue to underpin pork cutout and in turn, cash hog prices and futures. Results will be in Evening Report.
90-day outlook: Pork production typically makes annual lows midsummer alongside a seasonal peak in the CME lean hog index. So far this spring, gains in the index has lagged what could be considered seasonally normal. The index is up another 41 cents to $92.75 as of May 21, but the preliminary calculation puts the index up just 19 cents to $92.94 for Tuesday’s quote. Slowing gains in the index is rather concerning given recent strength in pork. We still feel summer futures are undervalued, but until the index can boast more impressive gains, futures are likely to continue to flounder.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
Feed needs: You have all corn-for-feed and soybean meal needs covered in the cash market through July.
Cattle
Price action: June live cattle futures rose 17 1/2 cents to $215.80 and nearer the daily high. For the week June cattle rose $3.575. August feeder cattle futures gained 60 cents to $300.375, nearer the daily high and for the week up $2.775.
5-day outlook: It was not a bad day in the cattle futures markets Friday, given the keener risk aversion in the marketplace following social media posts Friday morning from President Trump that sunk the U.S. stock market.
Still-solid cash cattle and beef market fundamentals limited selling interest today. USDA today reported cash cattle trading so far this week is trading around $229.50 for steers and heifers. Last week’s average cash cattle trading averaged $226.45. The noon report today showed wholesale boxed beef values continue to work higher. Choice cutout is up another 82 cents to $361.79, while Select rose $2.10 to $351.05. Movement at midday was 44 loads. The Choice-Select spread is presently $10.74.
Trading next Tuesday will likely be in reaction to this afternoon’s USDA’s Cattle on Feed report. Analysts polled by Reuters expected USDA to show the May 1 feedlot inventory declined 1.5% from year-ago to 11.381 million head. Placements are expected to have declined 3.2% from year-ago levels. Placements at 1.603 million head would represent the smallest total for April since 2020. Marketings are anticipated to have declined 3.3% in April as packers slowed slaughter runs amid poor cutting margins. USDA this afternoon will also detail frozen meat stocks at the end of April in the Cold Storage report. The five-year average is a 16.5-million-lb. decline in beef stocks during the month.
30-day outlook: The Memorial Day weekend kicks off the unofficial start of summer and the outdoor grilling season. That suggests still-strong consumer and retailer demand for beef in the coming weeks. However, risk appetite in the general marketplace and consumer confidence will have to remain upbeat for cattle and beef prices to remain at historically elevated levels. President Donald Trump is recommending a straight 50% tariff on goods from the European Union starting on June 1, and that’s what dented risk appetite today. The global trade situation cannot deteriorate further and if such occurs it’s likely the cattle and beef markets have peaked. The EU is a big purchaser of U.S. agricultural goods and trade talks at present appear to be going the wrong direction.
90-day outlook: The supply side of the ledger should remain friendly for cattle futures in the coming months, as cattle on U.S. feedlots remain at historically low levels. The cattle markets have shown keen resiliency on significant price setbacks the past several months. We are not ruling out more new record highs in live cattle and feeder cattle futures, and in the cash cattle market in the next few months.
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: You have all corn-for-feed and soybean meal needs covered in the cash market through July.