Hogs
Price action: August lean hog futures rose 65 cents to $106.475, near the session high and on the week up $1.80.
5-day forecast: The lean hog futures market bulls had a good week, including a technically bullish weekly high close on Friday. That suggests follow-through buying from the speculators is likely early next week. Cash hog and pork market fundamentals are also improving to further suggest the hog market has put in a seasonal bottom. The latest CME lean hog index is up 43 cents to $107.63 as of July 16, marking the first back-to-back rise and the biggest daily gain in the index since late June. The noon report today showed pork cutout firmed $1.58 to $116.32 on Thursday, the highest level in three weeks.
30-day outlook: With outdoor grilling season peaking and hog slaughter levels starting to rise, seasonally, the hog market bulls are going to have to have better U.S. pork export numbers for cash hog and futures prices to continue to appreciate. New U.S. trade deals with other countries will be closely scrutinized by hog market watchers. On the positive side, through the first half of this year, China imported 540,000 MT of pork, up 4.9% from the same period last year.
90-day outlook: The fate of the hog and pork markets in the coming months will likely be determined at least in part by price action in the cattle and beef markets, which are at or near historic highs. If beef prices remain at historically elevated levels heading into fall, better substitution demand for pork at the meat counter could occur—especially if the stock market starts to wobble. And the months of September and October have been historically unkind to the stock market.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
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.
Cattle
Price action: August live cattle futures fell 12 1/2 cents to $223.55, near mid-range and hit a contract/record high early on. For the week, August cattle rose $1.35. August feeder cattle futures lost $1.00 to $324.00, near mid-range and on the week down $1.325.
5-day outlook: Price action in the cattle futures markets has turned choppy and mostly sideways recently, which is not bearish and slightly favors the bulls. Cash cattle and beef market fundamentals have deteriorated a bit recently but remain overall bullish. That suggests cattle futures and cash markets will remain elevated for at least the near term. Live cattle futures’ large discount to the cash cattle market will continue to limit selling interest in futures next week.
Cash cattle trade became more active late this week, with USDA reporting steers averaging $235.91 and heifers $234.74. Last week’s average cash cattle trading price was $237.21. Packers have been reluctant to bid up for cattle supplies given negative cutting margins. The noon report today showed wholesale boxed beef prices were mixed with Choice up 77 cents to $374.05 and Select down $1.00 to $352.84. Beef movement at midday was good at 80 loads. The Choice-Select spread is presently $21.21.
30-day outlook: Potentially bullish for cattle markets in the coming weeks, President Trump recently announced a 50% tariff on Brazil, with Brazilian meatpackers considering whether to make any new beef shipments to the U.S. Meantime, concerns regarding New World Screwworm continue, meaning cattle imports from Mexico may continue to keep cattle supplies in the U.S. tighter. World Weather Inc. today said a high pressure ridge is expected to gradually strengthen and build into the Plains states in the next two weeks, which will lead to increasing heat and dryness and could start to become an issue for livestock stress, especially in the southern two-thirds of the region.
90-day outlook: The U.S. economy continues to hum along at a decent growth pace, with this week’s U.S. inflation data not showing any problematic signs. This scenario has pushed the major U.S. stock indexes to record highs this week, suggesting consumer confidence remains solid. That’s a good longer-term sign for cattle and beef markets, implying consumer demand for beef at the meat counter will remain strong enough to support the presently elevated cattle and beef prices. Any significant and sustained deterioration in the stock market in the coming weeks/months could spell the death of the record-setting bull market runs in cattle.
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.