Hogs
Price action: October lean hog futures rose 50 cents to $97.975, nearer the daily high. For the week, October hogs rose 85 cents.
5-day outlook: After October lean hog futures scored a contract high on Tuesday, the market spent the rest of the week in consolidation mode, which is not bearish. A price uptrend remains in place on the daily bar chart for October hogs, which will continue to invite the speculators to play the long side. Futures’ discounts to the cash hog index will also limit selling interest in futures in the near term. The latest CME lean hog index fell 16 cents to $105.70 as of Sept 17. Monday’s projected cash index price is down another 36 cents to $105.34. The national direct five-day rolling average cash price today is $105.92. The noon report today showed pork cutout value up $1.87 to $113.82, led by gains in bellies. Movement at midday was 155.12 loads. Hog market watchers will get an update on fall hog supplies in the Thursday, Sept. 25 USDA Hogs & Pigs Report.
30-day outlook: Seasonality factors suggest the recent weakness in the cash index will evolve into gains as cash hog prices tend to rise in September and/or early October. With pork at the meat counter a more affordable source of protein, better consumer demand in the coming weeks would support higher cash hog, fresh pork and futures markets.
90-day outlook: President Trump and Chinese Premier Xi Jinping talked on the telephone today, with the White House saying the talks went well. Better U.S.-China trade relations in the coming months could translate into better demand for U.S. pork from China. However, reports out today said China is pushing its pork producers to cut output amid a supply glut. China urged its top hog producers to play a leading role in reducing output as the country grapples with excess supply and weak demand in its massive pork sector. Officials reportedly called on major firms to lower breeding sows, scale back slaughter volumes, and maintain hog weights near 120 kg (265 pounds).
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 your soymeal needs covered through September in the cash market, with half coverage for October, November and December. For corn, you now have all needs through October covered in the cash market.
Cattle
Price action: October live cattle futures rose $1.20 to $233.575, nearer the daily high and for the week up $3.60. September feeder cattle futures rose 97 1/2 cents to $359.15, nearer the daily high and for the week up $8.75.
5-day outlook: The live and feeder cattle futures markets closed out the trading week today at or near their weekly highs. That’s a positive technical signal heading into trading next Monday. However, the cash cattle and beef market fundamentals continued to weaken this week, which may limit the upside in cattle futures markets next week, despite live cattle futures’ discounts to the cash cattle market.
Cattle traders will get updates on the nation’s cattle supplies and marketings with this afternoon’s monthly USDA cattle-on-feed report. Analysts expect placements of cattle on feedlots to be down around 9% from year-ago levels.
Cash cattle trading turned more active today. USDA today reported steers fetched an average price of $237.02 and heifers an average of $236.71. That compares to last week’s average cash cattle trade at $239.33. The noon report today showed boxed beef cutout values down again, with Choice-grade down $2.80 to $383.01, while Select-grade lost $2.22 to $359.09. Movement at midday was solid at 100 loads. The Choice-Select spread is presently $23.92.
30-day outlook: The significant weakening in wholesale boxed beef values recently has analysts suspecting market tops may have finally been put in place in cash and live and feeder cattle futures markets. Packer margins have succumbed to the downward wholesale beef price pressure. If retail beef prices at the meat counter garner greater attention from the consumer, it increases the likelihood of substitution demand for pork and poultry. However, cooler weather in the fall may support consumer beef demand.
90-day outlook: The Federal Reserve this week cut interest rates, making borrowing costs less for consumers. U.S. stock indexes rallied to record highs this week on notions of lower U.S. interest rates continuing to drive investor demand for equities. Trade tensions between the U.S. and its major counterparts have eased a bit. All of the above suggest upbeat consumer confidence in the fourth quarter, which also implies continued good demand for beef at the meat counter.
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: For soymeal, you have full coverage in cash through July, with half of your needs for August, September, October, November and December covered in cash. For corn, you have all needs through August covered in the cash market, with half of your needs for September and October covered in cash.