Hogs
Price action: July lean hog futures surged $2.30 to $107.10, which marked a $2.175 gain on the week. Nearby June futures climbed $1.775 to $102.625, closing on session highs.
5-day outlook: Hog futures saw a somewhat indecisive morning of trade before prices began to see robust strength in the latter portion of today’s session, sending deferred futures to contract highs. While some profit-taking is possible next week as prices have performed rather well recently, particularly in the August contract which has closed higher all but two days in the past two weeks, the technical outlook remains fully bullish amid building seasonal cash market strength. That is likely to continue to support prices over the next week, with any downside being limited. The steady climb in hog futures points to the sustainability and durability of the current rally in prices, something that will be hard to shake without a significant catalyst.
30-day outlook: After modest gains earlier this week that ultimately led to some weakness in futures, the CME lean hog index once again started showing strong gains late in the week. The index is up another 82 cents to $97.57 as of June 4. The preliminary calculation puts the index up another 80 cents to $98.37 for Monday’s quote. The strength in the index has encouraged traders to add premiums back into summer hog futures, as August futures are trading about $11 over the cash market. That shows anticipation for the seasonal rally to persist through the summer months.
90-day outlook: Pork cutout has started working higher at an impressive pace. After consolidating early in the week, pork started moving higher the past couple of days, showing robust strength this morning rising another $4.74 to $112.86. Bellies continue to lead the way higher, rising $10.58 this morning. Grocers continue to stock up for BLT season. Still, other cuts have shown impressive strength as well, with hams surging $7.77 this morning and ribs climbing $4.51. The broad-based rally could indicate grocers are gearing up for pork features, driving additional consumer demand to pork as beef prices continue to press all-time highs. That underpinning demand is likely to continue to provide a floor under hog futures in the coming quarter.
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: August live cattle futures rose $2.05 to $218.875, near the session high and hit a contract high. For the week, August live cattle rose $9.525. June live cattle gained $3.40 to $226.30 and hit a record high of $226.75. August feeder cattle futures rose $1.00 to $310.15, near the daily high and hit a contract/record high of $310.55. On the week, August feeders gained $11.325.
5-day outlook: The cattle futures markets bulls remain in high gear and there are still no early, strong technical clues that market tops are close at hand. Better risk appetite in the general marketplace helped the cattle market bulls to end the trading week. Cash cattle and beef market fundamentals remain strong and futures prices remain at discounts to the cash cattle market, suggesting more price upside in futures is likely next week. The cash cattle market has seen strong gains this week, actively trading around $5.00 higher at near $234.00 for steers and heifers, USDA reported at midday today. Last week’s USDA-reported cash cattle trading average was $229.94. The noon report today showed mixed boxed beef values, with Choice cutout down $1.36 to $365.49, while Select rose 10 cents to $356.71. Movement at midday was 62 loads. The Choice-Select spread has narrowed to $8.78.
30-day outlook: This morning’s U.S. nonfarm payrolls report showed the economy added 139,000 jobs in May, down slightly from April’s downwardly revised 147K, but slightly above market expectations. A healthy U.S. economy and upbeat consumer confidence will be essential in the coming weeks for cattle and beef prices to remain at historically elevated levels. Peak outdoor grilling season is at hand, so demand for beef should remain strong in the coming few weeks.
90-day outlook: There remains trader skepticism regarding the ability for cash cattle and cattle futures markets to continue their advance. The elevated cash, beef and futures prices are prompting concern regarding demand from consumer and retailers. A strong warning signal that would likely derail the record-setting bull run in the cattle markets in the coming months would be a significant deterioration of U.S. consumer confidence, evidenced by serious sell offs in the U.S. stock indexes. We suspect that as goes the U.S. stock market in the coming few months, so, too, will go the cash cattle, beef and live and feeder 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 have all corn-for-feed and soybean meal needs covered in the cash market through July.