Hogs
Price action: June lean hog futures climbed $1.225 to $101.15 and ended the day near session highs. That marked a $3.125 gain on the week.
5-day outlook: Nearby lean hog saw a slow start to the session before working higher as the day went on, supported by a favorable risk-on tone in the general marketplace. As a lot of the negative tariff news has already been baked into the market, which has allowed hog futures to work higher over the past couple of weeks. Still, strength has largely been headline driven, with down days coinciding with drawdowns in the stock market and up days coinciding with upticks in the stock market. This correlation shows both (along with cattle futures) are keyed in on trade talks and still need bullish headlines to work higher. That is a little concerning as the hog market has yet to really work higher without supportive outside markets. That leaves the market open to weakness if trade talks turn sour. Still, the technical outlook remains supportive, though some profit-taking is possible given June futures have risen in ten out of the last 12 sessions and maintain a fairly steep uptrend on the daily bar chart.
30-day outlook: The unofficial start to the grilling season is at hand and pork cutout has started the season off on a high note. Cutout still largely continues to chop sideways between $95.00 and $100.00 but saw impressive strength this morning. Cutout rose $4.95 to $100.81 at midsession, led by a $17.13 surge in bellies. While it is likely that a portion of those gains will be given up in afternoon trade, the sheer volume of pork moved at 247.77 loads likely caught the attention of the marketplace. Demand will garner much of the attention over the course of the next month and if consumers opt to increase their pork intake in an effort to cut down on grocery costs as we expect, it could bode well for hog futures in the meantime.
90-day outlook: While undergoing persistent weakness recently, the CME lean hog index has recently begun to work modestly higher. The index is up another 52 cents to $87.27 as of April 23, while the preliminary calculation puts the index up another 27 cents to $87.54 on Monday. Gains have slowed the last couple of days as movement has dropped in the negotiated market. If our suspicion is correct and pork is well supported into the summer months, that would bode well for cash hog prices as pork production falls to annual lows. Still, tariffs remain on the forefront of traders’ minds, as a strict trade policy following the recent 90-day pause would likely weigh heavily on pork exports.
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 corn-for-feed needs covered in the cash market through May. You also have all soymeal needs covered in the cash market through May.
Cattle
Price action: June live cattle futures prices rose 25 cents to $208.25, nearer the daily high and set a contract high close. For the week, June cattle gained $4.175. May feeder cattle futures gained $1.45 to $290.525, nearer the session high and hit a contract high. On the week, May feeders rose $3.675.
5-day outlook: The new contract highs and technically bullish weekly high closes in June live cattle and May feeders on Friday set the table for follow-through chart-based buying from the speculators early next week. Some more active cash cattle trade was taking place as of midday Friday, with USDA reporting steers and heifers were changing hands at around $210.50. That compares with last week’s average cash cattle trading price of $211.63. Feedlot operators were hoping to hold out for still-higher prices this week, especially as live cattle futures prices hit record highs. However, packer cutting margins well into the red prompted the packers to decline the higher cash cattle offers from the feedlots. The noon report today showed wholesale boxed beef cutout values higher, with Choice grade up $1.46 at $335.16, while Select grade gained $3.04 to $319.39. The Choice-Select spread is presently at $15.77. Movement at midday was light at 41 loads.
30-day outlook: With the warmer temperatures and later sunsets come better consumer demand for beef as the grilling season kicks into high gear in May. Consumer demand for beef is expected to remain solid in the coming weeks, barring a big slump in consumer confidence that could be brought on by even more heightened global trade tensions and the related worries about a U.S. economic recession. Cattle numbers on feed remain historically low, which should continue to keep cash cattle and cattle futures prices elevated in the coming weeks.
90-day outlook: Livestock traders will continue to closely monitor the U.S. stock indexes in the coming months, as they have proven to be good gauges for consumer confidence and U.S. economic growth prospects. The recent solid rebounds in the major U.S. stock indexes from their early-April lows are credited with helping the cattle futures markets rebound and set new record highs this month. Continued rallies in the stock indexes would be bullish for cattle markets. However, if the stock indexes stumble again, so, too, likely will the cattle futures markets.
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 should have all corn-for-feed needs covered in the cash market through May. You also have all soymeal needs covered in the cash market through May.