Hogs
Price action: April lean hog futures fell $0.05 to $90.775, near mid-range and hit a 2.5-month low today. For the week, April hogs were down $0.50.
5-day outlook: The lean hog futures market spent much of this week consolidating as bulls are working to stabilize prices amid a near-term downtrend in place. Today’s technically bearish weekly low close in April hogs will give the bears the technical edge early next week. Still-shaky trader/investor risk appetite in the general marketplace is also keeping the hog futures bulls timid amid the ongoing war in Iran.
The latest CME lean hog index is down 19 cents to $91.46. Monday’s projected cash index price is down 29 cents at $91.18. The national direct five-day rolling average cash hog price quote for today is $69.44. The noon report today showed pork cutout value up $3.15 at $98.50, led by gains in loins, butts and bellies. Movement at midday was good at 236.48 loads.
30-day outlook: Hog slaughter levels have risen lately to outpace year-ago levels, though the seasonal decline in hog weights has likely begun. Consumer demand into the summer grilling season will be a key component for futures price action in the coming weeks, especially with inflationary concerns that could find better substitution demand for pork over beef.
90-day outlook: An important element in the coming months for the cash hog and futures markets will be export demand for U.S. pork. Reports out of China say the world’s leading pork consumer is flush with hogs, which does not bode well for better Chinese purchases of U.S. pork. A successful Trump-Xi summit in China, scheduled for mid-May, could produce increased China demand for U.S. pork.
What to do: Get current with feed coverage.
Hedgers: You have 50% of Q2 production hedged with all remaining risk in the cash market.
Feed needs: You should have all your soymeal needs covered through April in the cash market. You should also have corn-for-feed needs purchased through April. Be prepared to make additional purchases.
Cattle
Price action: April live cattle futures rose $3.40 to $238.50, near the daily high, hit a three-week high and for the week were up $4.45. May feeder cattle futures gained $8.075 to $359.825, near the daily high, hit a four-week high and for the week were up $13.45.
5-day outlook: The live cattle and feeder cattle futures markets finished the week strong, including technically bullish weekly high closes that suggest follow-through buying strength early next week.
USDA at midday today reported active cash cattle trading this week, with steers averaging $234.94 and heifers averaging $234.92. The agency earlier this week reported cash trading last week averaged $235.08. The noon report today showed wholesale boxed beef cutout values up, with Choice grade back above Select. Choice-grade was up $4.24 at $394.09, while Select-grade gained $0.23 at $391.89. Movement at midday was 62 loads. The Choice-Select spread at midday today was plus $2.20. Beef packer margins are still in the black late this week.
30-day outlook: Cattle slaughter levels have been surprisingly low despite positive cutting margins, which will likely lead to stable boxed prices and pressure on feedlots who need to sell heavy cattle. Traders in the coming weeks will keep a close eye on cash trade, which has held a steady- to lower tone over the past few weeks. Some feedlots may acquiesce in cash negotiations due to extreme heat and wildfires in the Plains, but tight supplies will continue to provide some leverage to the group, especially with the grilling season ahead.
90-day outlook: The war in Iran and its economic consequences, including on consumers—namely higher gasoline prices—may play a key role in demand for beef at the meat counter over the next few months. Outdoor grilling season is getting closer but if gasoline prices at the pump are close to or above $4.00 a gallon, many consumers will be looking to buy more economical protein in the grocery store. Still, longer-term supply and demand fundamentals remain sound for the cattle and beef markets. Historically tight cattle supplies on feedlots will continue to limit the downside in futures prices.
What to do: Cover corn-for-feed needs through March in the cash market. Be prepared to make additional purchases.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: For soymeal, you have full coverage in cash through April. You have corn-for-feed needs covered through April as well. Be prepared to make additional purchases if value prices continue.