Livestock Analysis | November 19, 2021
Price action: December lean hog futures fell $1.35 to $73.75, while February lean hogs fell 82.5 cents to $82.475, up 2.4% from $80.55 at the end of last week and the fourth consecutive weekly gain. Earlier today, February hogs reached $83.725, the highest intraday price since Oct. 8.
5-day outlook: Hog futures pushed to six-week highs earlier today but saw little sustained buying interest as cash fundamentals remained soft. Still, futures extended a rally from late October amid growing beliefs prices have established a near-term bottom and the cash market may have established an autumn low, earlier than the typical early-winter troughs in late December. Stabilization in the CME lean hog index could add further support to futures next week. Today’s index fell $1.02 to $75.26, the lowest since Feb. 12.
30-day outlook: December futures are trading close to the cash index, which means the lead-month contract should shadow daily movement in the cash market for the next three weeks. Retail demand and wholesale pork market direction will be two price keys into the end of the year. Wholesale pork extended a slump this week, but movement was generally strong, indicating good demand at lower prices. Pork cutout values rose $1.83 early today to an average of $91.52, down from $94.71 at the end of last week. Movement by midday totaled 130 loads. Carcass values on national direct markets averaged $54.97 early today, down from $58.00 at the end of last week.
90-day outlook: Deferred futures contract to hold wide premiums over the nearby, reflecting longer-term prospects for seasonal strength and smaller animal supplies next year. USDA’s September Hogs and Pigs Report implied December-February hog slaughter would average about 6% under year-ago levels. Fall farrowings were estimated down 4% from last year, which implies a similar drop in the pig crop and spring hog supplies. The numbers as a whole suggest a futures rally into early summer. Weekly hog slaughter has lagged year-ago levels, but historically climbs to annual highs in mid-December, indicating growing supplies in the pipeline. Meatpackers this week slaughtered an estimated 2.635 million head, up 0.8 % from the previous week but down 3.4% from the same week in 2020. Year-to-date, slaughter is running 2.1% under 2020 levels. USDA’s next quarterly Hogs and Pigs report is Dec. 23.
What to do: Get current with feed advice.
Hedgers: You currently have all risk in the cash market.
Feed needs: You should have all corn-for-feed and soybean meal needs covered in the cash market through October.
Price action: December live cattle futures rose 37.5 cents to $133.525, while February live cattle rose 45 cents to $137.70, up 1.2% for the week and the highest closing price since Sept. 1. January feeder cattle fell 45 cents to $160.925.
5-day outlook: Cash cattle markets this week extended recent strength, with late-week prices topping $133.00, up around $2.00 from the 4 1/2-year highs reached last week. It seems doubtful cash will sustain that strength next week, since the packing industry will be operating a on a reduced schedule around the Thanksgiving holiday. Conversely, packers will be buying cattle for processing in late November and early December. Wholesale beef prices’ rebound today may indicate demand for beef has improved from apparently weak early-to-mid-autumn levels.
30-day outlook: Cattle slaughter in December of recent years has proven surprisingly large, often matching or slightly exceeding traditional summer highs. The latest market talk indicates they’ll be operating aggressively again next month, which seemingly bodes well for fed cattle demand. Meanwhile, steer dressed weights apparently reached an early seasonal peak at 922 pounds per head in mid-October, thereby offering support for ideas the supply of market-ready animals has recently tightened significantly. This seemingly bodes well for the late-year price outlook. Prospects would improve that much more if retail beef prices were to reflect the sizeable wholesale losses posted since the August high, which might then reinvigorate consumer beef demand.
90-day outlook: Cattle slaughter typically declines from early winter into the February-March period, when annual lows are reached. Beef demand generally proves relatively stable early in the year, then surges as the grilling season looms. As noted above, the price outlook for both cattle and wholesale beef prices would improve significantly if/when grocers cut prices seen by consumers. Still, recent developments, such as the one-week record for Chinese purchases of U.S. beef, suggest export demand remains robust. We also believe the extremely wide disparity between farm-level and wholesale prices will narrow, especially if the supply of market-ready animals in feedlots continues to tighten. That also bodes well for early-2022 cattle prices.
What to do: Get current with feed advice. Be prepared to add cattle hedges if the rally stalls.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all corn-for-feed and soybean meal needs covered in the cash market through October.
