Hogs
Price action: June lean hog futures fell $0.75 to $98.625, near the session low and hit a five-month low. For the week, June hogs were down $2.65.
5-day outlook: The lean hog futures market bears are in firm technical control and gained more strength by producing a bearish weekly low close today in the June contract.
The latest CME lean hog index is down 17 cents to $91.02. Monday’s projected cash index price is down another 17 cents to $91.02. The national direct five-day rolling average cash hog price quote for today was $95.11. The noon report today showed pork cutout value up $2.11 at $97.71, led by gains in loins and ribs. Movement at midday was solid at 227.41 loads.
30-day outlook: Lean hog futures have faded since the April 30 case of pseudorabies reported in a small facility in Iowa, which traced back to an outdoor herd in Texas with likely exposure to feral swine. Measures have been taken to contain and isolate any risks, with the incident only involving a small number of animals. Hog futures bulls are skittish. Still, this should bring the full supply and demand fundamental picture back into trade, with traders eyeing better substitution demand for pork as cattle prices remain historically elevated.
90-day outlook: A smaller U.S. breeding herd and waning slaughter into the second and third quarters should provide a floor under cash hog and futures prices. On the export front, demand for U.S. pork has been less than robust. Improving relations between the U.S. and China in the coming months would likely mean better demand for U.S. pork from China. Hog traders will closely monitor next week’s summit meeting between President Trump and China President Xi Jinping.
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 and corn-for-feed needs covered in the cash market through May. Be prepared to make additional purchases.
Cattle
Price action: June live cattle futures fell $1.15 to $248.90, near the daily low. For the week, June cattle were down $4.10. May feeder cattle futures rose $1.05 to $367.375, near mid-range for the week down $4.025.
5-day outlook: June live cattle futures saw a technically bearish weekly low close today as the bulls are fading, technically. However, selling interest in futures was limited by solidly higher cash cattle prices late this week. USDA at midday today reported active cash cattle trading this week, with steers averaging $258.32 and heifers $258.05. The agency earlier this week reported cash trading last week averaged $255.02. The noon report today showed wholesale boxed beef cutout values higher. Choice-grade was up $2.08 at $389.02, while Select-grade gained $0.75 to $385.17. Movement at midday was good at 82 loads. The Choice-Select spread at midday today was plus $3.85.
30-day outlook: Still overall bullish technicals and supply and demand fundamentals continue to lean supportive for the cattle futures markets. Despite the gains in cash cattle prices, beef packer margins continue to ink deeply negative returns, which is likely to limit slaughter levels in the near-term as packers look to keep cash trade steady to lower. If this trend persists, it could mean an increase in retail prices as grilling season demand picks up. However, any uptick in boxed beef values and movement could be attributed to grocers locking in purchases for Memorial Day features.
90-day outlook: Historically tight fed cattle supplies on feedlots will continue to provide underlying support to cash cattle, futures and beef prices, especially with the outdoor grilling season under way. A still-worrisome element for cattle market bulls and for cattle producers is retail gasoline prices that are well above $4.00 a gallon in many locations. However, with U.S. stock indexes at or near record highs, U.S. consumer confidence in the coming months could remain upbeat.
What to do: Cover corn-for-feed and soymeal needs through May in the cash market. Be prepared to make additional purchases.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: You have corn and soymeal for feed needs covered in the cash market through May. Be prepared to make additional purchases if value prices continue.