Livestock Analysis | January 5, 2024
Price action: Hog futures advanced again Friday, although the spring and summer contracts led the way higher. Nearby February hogs rose 95 cents to $70.00. That represented a weekly gain of $2.025.
5-day outlook: Pork cutout ended Thursday having risen modestly, then added another 33 cents to reach $84.83 at midsession today. But Thursday’s calculation of Wednesday’s hog index was confirmed at $65.86 (up 67 cents), today’s preliminary figure slipped one cent to $65.85 (as of Jan. 4). That may have limited the futures advance. The short-term outlook still seems rather promising, due in part to the sizeable discount built into current hog prices versus those seen early last year. The industry is likely expecting January kills to run 1%-3% over year-ago levels, as was largely implied by the December Hogs & Pigs report. This week’s holiday-reduced slaughter is estimated at 2.381 million head, up 1.5% annually. Next week’s total will give a better idea of the comparative supply of slaughter hogs.
30-day outlook: History indicates a tendency for hog and pork prices to rise through the first 6-8 weeks of the year. This reflects a seasonal reduction in hog supplies, as well as improved demand for the various pork cuts in the wake of the holidays. Ham demand has usually diminished at this time of year, but the early arrival of Easter 2024 on March 31 may keep that market relatively well supported as processors and grocers rebuild supplies for planned Easter dinner features.
90-day outlook: The hog market has traditionally tended to post an intermediate late-winter peak in mid-to-late February, with the subsequent slide often carrying the market lower through March and into early April. Consumer demand seemingly hits a lull at that time, with processor demand for Easter hams declining once they’ve got their short-term needs met. Conversely, the onset of demand for the grilling season after Easter, along with hog supplies declining toward annual lows in early summer, tends to spark a large spring advance.
What to do: Get current with feed advice. Carry all production risk in the cash market for now.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have all corn-for-feed and soymeal needs covered in the cash market through January.
Price action: February live cattle futures fell 55 cents to $170.575 and nearer the session low. On the week, prices rose $2.075. March feeder cattle futures dropped $1.50 at $224.15, nearer the session low and for the week up $1.05.
5-day outlook: The technically bearish “outside days” down and weekly low closes in February live cattle and March feeder cattle futures today give the speculator bears momentum to suggest they will try to press the downside early next week. However, the bulls can argue that improving cash market fundamentals late this week will limit selling interest in futures. After packers bought cattle at around $175.00 in the northern market earlier this week, feedlot operators raised their asking prices to $177.00 in the southern Plains. It appears this week’s average cash cattle price will rise at least $2.00. USDA reported 9,681 head of fed steers officially traded at $174.51 Thursday. The four-day average is $174.65, up $2.52 from the week-ago figure. The noon beef report today showed Choice grade beef cutout value up $1.98 at $277.88 and Select grade up 29 cents at $259.11. The Choice-Select spread is $18.77 and movement at midday was 63 loads. USDA today reported weekly U.S. beef export sales of 9,500 MT for 2023, up notably from the previous week and up 69% from the four-week average. Net beef sales totaled 7,100 MT for 2024.
Cattle traders will be watching a wintry weather pattern in the Plains early next week. World Weather Inc. today said a strong storm system is expected to impact the region Monday. Snow and strong winds will be involved with this, along some rain in southeastern areas. The greatest impacts from this system will be possible from the Oklahoma Panhandle and northern Texas Panhandle through central Kansas and into southeastern Nebraska. “Blizzard or near-blizzard conditions are likely and travel delays and livestock stress are expected,” said the forecaster. Another snow event is likely Jan. 12 – 13 as arctic air moves in.
30-day outlook: The December employment report from the Labor Department today showed U.S. employers added 216,000 jobs in December, above market expectations for a rise of 170,000 jobs. The unemployment rate ticked down to 3.7%, below expectations of 3.8%. Today’s upbeat jobs report suggests the U.S. economy continues to show steady growth, which is a positive sign for better consumer demand for beef at the meat counter.
90-day outlook: Cash cattle prices rebounded in late 2023 and rose again this week. This could be the start of the seasonal first-quarter rally in prices due to a late-winter drop in fed cattle supplies and the onset of grilling-season demand in the spring. However, steer weights set a record at 941 pounds per head in mid-December. That hints feedlot marketings are not current. That may limit the cattle markets’ price upside in the coming weeks.
What to do: Get current with feed advice. All production risk in the cash market for now but be prepared for some hedge coverage as we have demand concerns.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have all corn-for-feed and soymeal needs covered in the cash market through January.
