Hogs
Price action: April lean hog futures closed steady at $95.725, near mid-range and for the week up $2.05.
5-day outlook: The lean hog futures market early today saw a modest rebound from Thursday’s losses but could not hold those gains into the close. Still, hog futures performed pretty well given the sharp losses suffered in the cattle futures markets the past two sessions.
The latest CME lean hog index is up 41 cents to $89.12. Monday’s projected cash index price is up another 32 cents to $89.44. The national direct five-day rolling average cash hog price quote for today is $67.13. The noon report today showed pork cutout value up 99 cents at $98.37, led by gains in ribs, bellies and hams. Movement at midday was 178.30 loads.
30-day outlook: Cash hog market strength continues to lend support to lean hog futures, with rising beef prices at the meat counter driving consumers to shift toward more economical pork cuts. Near-term fundamentals are bullish, as retailers focus on the Easter holiday and upcoming grilling season. However, the key will be if demand, both global and domestic, can match increased pork production from increased slaughter levels and higher litter rates.
90-day outlook: The upcoming grilling season coincides with a seasonal contraction in hog supplies and should support hog and pork prices in the coming few months. Increased global demand for pork may have to occur in order to lift hog and pork markets prices in the coming months.
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 March in the cash market. You should also have corn-for-feed needs purchased through March. Be prepared to make additional purchases.
Cattle
Price action: April live cattle futures fell $4.675 to $232.225, near the session low and hit a five-week low. For the week, April live cattle lost $9.875. March feeder cattle futures lost $6.225 to $355.425, near the daily low and hit a four-week low. For the week, March feeders were down $12.60.
5-day outlook: It was a dreadful end to the trading week and month for the live and feeder cattle futures bulls. Today’s technically bearish weekly and monthly low closes produced serious near-term technical damage to suggest market tops are in place. A hot producer price index report today and a risk-off day in the general marketplace were also bearish elements for the cattle markets. Lower cash cattle trade late this week was also a negative for futures.
More active cash cattle was reported by USDA at midday today, the agency saying steers averaged $243.51 and heifers averaging $243.21. USDA Monday reported average cash cattle trading last week at $246.91. The noon report today showed boxed beef cutout values higher, with Choice-grade up $1.08 to $378.97, while Select-grade rose $3.44 to $374.23. Movement at midday was 48 loads. The Choice-Select spread is presently plus $4.74.
30-day outlook: Beef packers are presently cutting in the red, which will limit their cash cattle bids in the near term. However, reduced slaughter levels have pushed Choice boxed beef to near non-pandemic seasonal records, easing some pressure on deeply negative packer margins. The closure of a 50,000-head capacity yard in Texas is the most recent example of a rather bleak landscape for the industry.
90-day outlook: Historically tight cattle supplies on feedlots and still-strong consumer demand for beef will continue to be the main fundamental drivers in the coming months, likely limiting the price downside in futures, cash cattle and beef markets. Cattle futures traders will be more closely watching the U.S. stock indexes in the coming weeks. If the stock indexes continue to wobble, and if notions grow that the Federal Reserve may not be able to lower interest rates, consumer confidence could be dented, which in turn could reduce demand for beef at the meat counter.
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 March. You have corn-for-feed needs covered through March as well. Be prepared to make additional purchases if value prices continue.