Hogs
Price action: April lean hog futures fell 90 cents to $93.45, nearer the daily low, hit a three-week low and for the week were down $2.175.
5-day outlook: The lean hog futures market’s technically bearish weekly low close today sets the stage for follow-through selling pressure from the chart-based speculators early next week. Risk aversion in the general marketplace again this week kept the hog futures bulls squeamish, amid the ongoing Middle East war.
The latest CME lean hog index is up 24 cents to $91.44. Monday’s projected cash index price is up another 16 cents to $91.60. The national direct five-day rolling average cash hog price quote for today is $68.97. The noon report today showed pork cutout value up 97 cents at $101.26, led by gains in bellies and ribs. Movement at midday was 121.12 loads.
30-day outlook: A resilient cash hog market may limit the downside in futures in the coming weeks. And if U.S. consumer confidence starts to erode more substantially, pork demand will likely benefit from consumers switching to the more economical pork cuts at the meat counter. The cattle futures and cash cattle markets have come under pressure recently, which may limit speculators buying interest in hog futures, if cattle futures continue to erode.
90-day outlook: One important element in the coming months for the cash hog and futures markets may be export demand for U.S. pork. Reports out of China say there is a domestic pork glut, which does not bode well fore Chinese purchases of U.S. pork. A successful early-April Trump-Xi summit in China may hold the key to better China demand for U.S. pork. The upcoming grilling season coincides with a seasonal contraction in hog supplies and should support hog and pork prices in the coming few 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 $0.35 to $230.90, near mid-range and for the week down $3.675. March feeder cattle futures gained $1.25 to $349.475, near mid-range and for the week down $6.15.
5-day outlook: The live cattle and feeder cattle futures markets late this week mostly paused as the bulls try to stabilize the markets after recent strong selling pressure. Keener risk appetite in the general marketplace the past couple weeks, amid the war in the Middle East, has sapped cattle bulls’ confidence. Workers at the JBS-owned meatpacking plant in Greeley, Colorado plan to begin a labor strike Monday. This could be a big and potentially bearish element for the cattle markets in the near term. A winter storm this weekend and strong to extreme winds are expected across the region Sunday, with gusts as high as 55 to 75 mph. A few gusts as high as 80 mph may occur, especially near the Kansas/Colorado border. Livestock stress, travel delays, and plenty of blowing dust are expected as a result. Some snow is possible with the wind in northeastern production areas. In the Northern Plains, a snowstorm with blizzard or near-blizzard conditions will occur across the southern half of the region Saturday into early Sunday and will cause livestock stress and travel delays. Well below average temperatures will move in behind this system for Sunday into Tuesday with subzero Fahrenheit temperatures across a majority of the region.
More active cash cattle was reported by USDA at midday today, with the agency saying steer prices averaged $234.77 and heifer prices averaged $235.02. USDA Monday reported average cash cattle trading the last week at $239.94. The noon report today showed boxed beef cutout values slightly firmer, with Choice-grade up 16 cents to $397.25, while Select-grade rose 4 cents to $390.86. Movement at midday was light at 28 loads. The Choice-Select spread is presently plus $6.39.
30-day outlook: The fate of the cattle futures markets in the coming weeks may lie with what happens with the war in the Middle East and the resulting spike in energy prices—namely gasoline at the pump. If U.S. consumers are paying close to $4.00 or more for gas, that will likely translate into substitution buying of more economic meats at the grocery store. If the war ends in the next few weeks, then consumer confidence would be boosted and gasoline prices would likely begin to decline—a scenario that would likely get the cattle market bulls off their heels.
90-day outlook: Longer-term supply and demand fundamentals remain sound for the cattle and beef markets. While cash cattle prices have declined recently, boxed beef values have firmed. 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 March. You have corn-for-feed needs covered through March as well. Be prepared to make additional purchases if value prices continue.