Hogs
Price action: December lean hog futures rose $0.025 to $65.575, near mid-range and for the week down $1.35.
5-day outlook: The hog futures market saw very tepid short covering today after hitting a contract low in December futures on Thursday. Technicals remain firmly bearish. Futures prices remain trapped in a downtrend on the daily bar chart. The CME cash hog index and cash hog prices continue to trend down, also.
The latest CME lean hog index is down 67 cents to $72.15. Monday’s projected CME index price is down another 99 cents at $71.16. The national direct five-day rolling average cash hog price quote for today is $67.34. The USDA noon pork report today showed cutout value was up $0.78 at $76.01, led by gains in picnics and bellies. Movement at midday was decent at 193.63 loads.
30-day outlook: Technical and fundamental challenges continue to roil short-covering interest in lean hog futures. Pork cutout continues to linger around multi-year lows amid pressure from weaker consumer demand. Rising energy costs and softer consumer sentiment have weighed heavily on pork, even as production runs slightly below year-ago levels. Managed money remains heavily short, which has curbed sustained buying interest and limited follow-through strength in futures.
90-day outlook: Ample frozen U.S. pork stocks and cheaper alternative proteins continue to overshadow pork at the meat counter. Heavier carcass weights have offset much of the year-over year decline in hog inventories. A sustained recovery in cash hogs and futures depends on better evidence that smaller supplies are tightening pork production. Demand for U.S. pork abroad has also been unremarkable and will likely need to improve in the coming months, to help revive the presently depressed lean hog futures bulls.
What to do: Get current with feed coverage.
Hedgers: You currently have all risk in the cash market.
Feed needs: You have corn-for-feed needs covered through the end of December, and are hand to mouth for soymeal for feed needs. Be prepared to make purchases if value prices arise from fall harvest pressure.
Cattle
Price action: December live cattle futures closed unchanged at $231.125, nearer the session high and for the week up $2.775. November feeder cattle futures gained $1.20 to $348.125, near the session high and for the week up $6.225.
5-day outlook: The cattle futures markets bulls had a good week, heading into this afternoon’s monthly USDA cattle-on-feed report. The report is expected to show placements will likely again be the most closely watched element, along with a quarterly breakdown of the heifer-steer ratio as traders look for signs of herd rebuilding. A poll by Reuters found that analysts, on average, see cattle inventories as of Oct. 1 at 11.452 million head, up 0.3% from last year. Inventory is expected to remain near-steady despite placements being expected to fall 7.4% from year-ago levels at 1.871 million. Marketings are also seen falling 7% to 1.518 million head. If realized, the average analyst estimates for both placements and marketings would be record lows for the month of September. Read Pro Farmer Economist Spencer Langford’s preview of the reporthere.
There has been no USDA-reported cash cattle trading as of this writing at midday Friday, ahead of the COF report. The agency reported average cash cattle trading last week at $224.19. The noon report today showed lower boxed beef prices, with Choice grade down $1.83 at $367.64 and Select grade down $0.46 at $349.95. Movement at midday was good at 97 loads. The Choice-Select spread is presently plus $17.69.
Fluctuating temperatures are expected to occur across much of the Plains states in the coming days. Some livestock stress may occur due to erratic swings in temperature, particularly in Montana, where temperatures will shift from the low 20s to mid-70s into Saturday.
30-day outlook: Cattle futures markets this week saw the highest price levels since early July. Technical buying accelerated after confirmation of solidly higher cash cattle trade last week, while wholesale beef values firmed as consumer demand has remained resilient. Meanwhile, herd rebuilding efforts continue to lag, which reinforces a price-constructive fundamental backdrop and limits the prospect of a rapid supply recovery. Feeder cattle continue to find support from the pullback in the grain futures complex, which is conducive to improved margins for cattle feeders.
90-day outlook: Steady, solid demand for beef at the meat counter in recent months has kept cattle futures markets elevated. Even with heightened inflation concerns, including higher energy prices, most consumers are still stepping up to the meat counter and preferring beef over other proteins. The U.S. economy appears to be showing enough strength to keep consumers mostly upbeat despite higher gasoline prices at the pump. Such suggests retail demand for beef will continue strong in the coming months—barring any major, sustained setback in the U.S. stock market.
What to do: You are covered through the end of December for corn-for-feed, and are hand to mouth for soymeal for feed needs. Be prepared to make purchases if value prices arise from fall harvest pressure.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: You are covered through the end of December for corn-for-feed, and are hand to mouth for soymeal for feed needs. Be prepared to make purchases if value prices arise from fall harvest pressure.