Livestock Analysis | October 22, 2021
Price action: December lean hog futures rose 12.5 cents to $73.325 per hundredweight, down 6.3% from $78.275 at the end of last week. The contract earlier fell to $72.875, the lowest intraday price since $72.50 on Sept. 22.
5-day outlook: Weak cash fundamentals weighed on hog futures this week, as did a severe technical breakdown on the daily charts. Futures are nearing oversold territory, which means the market may generate a corrective bounce early next week. Stabilization in the slumping wholesale pork market could also lend support to futures. Pork cutout values early today rose $4.10 to an average of $102.38, led by a jump of nearly $19.00 in hams. Cutout values hit a 7 1/2-month low Oct. 20.
30-day outlook: The gap between the CME lean hog index and December futures will be watched closely. The latest index fell to $84.83, the lowest since March 4 and over $11.00 above the December contract. Strong exports could help limit further futures downside. USDA yesterday reported net U.S. pork sales for the week ending Oct. 14 at 33,500 MT, up 51% from the previous week and up 9% from the four-week average. Accumulated exports so far this year are still down 5.3% from last year’s pace.
90-day outlook: U.S. hog numbers are down from last year’s levels, a trend that’s expected to continue in 2022, limiting pork supplies over the longer-term. However, hog slaughter is expected to seasonally increase and demand for some pork cuts is likely to be weak. Meatpackers slaughtered an estimated 2.606 million head of hogs this week, down 0.7% from the same period last week and down 2.6% from the same period a year ago, USDA reported. USDA’s next quarterly Hogs and Pigs report is scheduled for Dec. 23. In the previous report, USDA estimated the U.S. hog herd at 75.4 million head as of Sept. 1, down 3.8% from the same date in 2020.
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 fell $1.225 to $128.325 per hundredweight, down 2.0% for the week and the lowest closing price since $138.225 on Oct. 6. November feeder cattle fell $2.175 to $156.90, the lowest close since Oct. 5.
5-day outlook: Live and feeder cattle futures posted technically bearish weekly low closes, which may portend further chart-based selling early next week. But an unexpected decline in feedlot placements in USDA’s Cattle on Feed report late today may generate fresh buying activity. Feedlot operations placed 2.163 million head of cattle on feed during September, down 2.9% from the same month a year earlier, USDA reported. Analysts on average projected an increase of about 1.4%, based on a Reuters survey. An estimated 11.55 million head of cattle were on feed as of Oct. 1, down 1.4% from a year earlier and larger than the 0.6% decline analysts expected. The number underscore the industry’s herd contraction in recent years and indicates beef supplies in the pipeline for 2022 will remain limited.
Next week’s price direction will also be influenced by the wholesale beef market, which is showing signs of rebounding. Choice cutout values rose 98 cents early today to an average of $281.64.
30-day outlook: Cattle market seasonal patterns typically suggest a tendency for some fourth-quarter price strength, what with lower fed cattle supplies. However, high retail meat prices appear to be crimping consumer demand. Premiums in deferred cattle futures don’t bode well for current marketings, and cattle weights remain high, raising questions whether the seasonal price strength expected in coming weeks will materialize.
90-day outlook: One potentially bullish factor is the U.S. stock market’s strong rebound from October lows, with the S&P 500 index hitting a record high this week. Stock market bulls appear to have rebuilt a good head of steam that will provide a boost of consumer confidence into year’s end, which may translate into greater demand for pricier foods, such as steaks.
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.
