Hogs
Price action: June lean hog futures closed 40 cents higher to $97.575 today, though still lost $1.775 on the week.
5-day outlook: Lean hog futures saw some strength late in the session, contrary to livestock futures which pulled off session highs. This rare, negatively correlated price action can likely be attributed to traders covering some of their positions ahead of this week’s tariff meeting with China and Monday’s WASDE reports. While the WASDE typically does not have a great effect on the livestock markets, sometimes spillover volatility will end up causing exacerbated moves, prompting some pre-report positioning today. The outlook for the next week is somewhat skewed higher, but that is contingent on how trade talks go this weekend in Geneva between the U.S. and China. China is a top importer of pork and their being priced out of the U.S. market has weighed on pork prices over the past several months. Any certainty that China would return to the U.S. market would likely quickly provide bullish results in pork, which would spillover to the cash hog market and futures.
30-day outlook: The CME lean hog index is down 9 cents to $90.07 as of May 7, ending the recent string of gains. The preliminary calculation puts the index down another 8 cents to $89.99 on Monday. The marketplace seemed to anticipate the downturn in the index as futures have been trending lower over the past couple of weeks. Still, with May futures finishing just 38.5 above Monday’s quote for the index, there remains a lot of uncertainty surrounding the cash market in a time that is generally bullish. Again, this likely points to export demand, but pork cutout surging this morning could provide a hint that seasonal strength is returning. After languishing for much of this week, pork cutout surged $3.44 to $97.94 this morning, which would be the highest quote since May 2 if sustained through afternoon trade. Gains in ribs, butts and loins led cutout higher this morning, while movement surged to 309.73 loads at midsession, the largest in recent memory.
90-day outlook: Trade deals have been slow to develop, which has weighed on hog futures since tariff talks really ramped up in February. The anticipation of pork exports being highly hindered has weighed on cutout as well, which has struggled to see seasonal gains over the past several weeks. If trade deals were to be made with agricultural products as a focus, which has been mentioned in meetings with several countries, it would be supportive for hog futures in the long-term, but the longer U.S. pork is priced out of the world market, the more unpredictable the long-term ramifications are.
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 and soymeal needs covered in the cash market through June.
Cattle
Price action: June live cattle futures rose 42 1/2 cents to $214.675 and hit a contract high. For the week, June live cattle gained $3.575. August feeder cattle futures fell 95 cents to $300.30 after also hitting a contract high early on. For the week, August feeders rose $3.40.
5-day outlook: The strong bulls markets in cattle futures roll on, with no early chart clues to suggest market tops are close at hand. That suggests more chart-based buying from the speculators next week. Cash cattle and beef fundamentals remain strong. Cash cattle trading commenced today in heavier volumes at sharply higher price levels than seen earlier this week in lighter volumes. That brought steers late this week averaging $224.49 and heifers averaging $221.96. Last week’s USDA-reported average cash cattle trading price was a record $220.97. The noon report today showed wholesale boxed beef values lower, with Choice down $1.36 to $346.53, while Select slipped 68 cents to $332.52. Movement at midday was decent at 75 loads. The Choice-Select spread is presently $14.01.
30-day outlook: Peak outdoor grilling season is right around the corner, suggesting retailer and consumer demand for beef will remain solid. At the same time, cattle on U.S. feedlots continue to show historically tight supplies. Feedlots are adding to cattle weights to meet the strong demand for beef. Steer carcass weights were unchanged at 946 lbs. from the prior week but 26 lbs. above year-ago and 47lbs. above the five-year average. The added weight is helping packers offset sharply reduced slaughter levels. Packers have secured hefty supplies as of late, with the availability of May contracted supplies easing some near-term supply concerns. Still, all of the above point to elevated cattle and beef prices in the coming weeks.
90-day outlook: The cattle and beef markets are also likely to be impacted in the coming few months by the health of the U.S. economy. Dramatically reduced ocean shipping coming into U.S. ports just recently may be an ominous precursor to some product shortages on U.S. retailer shelves and corresponding higher prices. This scenario could kill the record-setting bulls runs in cattle and beef markets. A good gauge of U.S. economic health is the U.S. stock market. The recent strong rallies from their early-April lows in the U.S. stock indexes are so far not painting a dour picture for the U.S. economy in the coming months. Cattle traders will continue to monitor the price trends in the U.S. stock Indexes in the coming 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 should have all corn-for-feed and soymeal needs covered in the cash market through June.