Livestock Analysis | October 27, 2023
Price action: Nearby December lean hog futures ended the week at $70.475, up $1.85 on the day and $4.475 on the week.
5-day outlook: The lean hog index continued its seasonal decline this week, but the rate of decline slowed significantly. It fell about 70 cents late last week, but Wednesday’s official quote fell just 22 cents to $78.19 and Thursday’s preliminary figure dropped only 24 cents to $77.95 when calculated today. Moreover, pork cutout spent the latter part of the week fluctuating between $85.00 and $88.00, with the midsession Friday report stating it at $87.37, up $1.64 from Thursday’s average. This week’s preliminary hog slaughter total reached 2.614 million head, up 2.0% from year-ago. We tend to expect more of the same in the various aspects of the market next week, but the sizeable discounts built into winter futures may spur fresh CME gains.
30-day outlook: The September USDA Hogs & Pigs report implied hog supplies in the latter part of the year would tend to match year-ago levels, although numbers have consistently exceeded 2022 levels through much of this year. Indeed, traders expecting increased production might turn more optimistic if hog numbers dip back toward year-ago levels. USDA’s monthly Cold Storage report published Wednesday suggested U.S. pork demand remained robust. Moreover, the contra-seasonal dip in ham stockpiles, along with whole turkey stocks at a 17-year low as of September 30, suggest processors and grocers will be forced to pursue fresh hams more aggressively as they prepare for the year-end holiday season. These factors imply diminished downward pressure on hog and pork prices over the next month, which in turn may keep futures working upward to meet the cash market.
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 November.
Price action: December live cattle futures rose $2.90 to $182.225 and nearer the session high. For the week, December cattle still lost $2.40. November feeder cattle futures rose 40 cents to $236.90 and near mid-range. For the week, November feeders lost $5.325.
5-day outlook: The December live cattle futures bulls made a save today by posting solid gains and producing a technically bullish weekly high close. Key for the bulls early next week will be to produce some important follow-through buying interest in December cattle futures. Cash cattle trade so far this week saw USDA report about 11,000 head of steers trading around $184.01 Thursday, with about 4,000 in Nebraska changing hands at $184.62 and about 6,000 going for $183.83 in Iowa. So far there has been little happening in the southern plains. Today’s futures gains suggest cash cattle will trade firmer in the southern Plains today, with the weekly average for the five areas likely to come in between $183.00 and $184.00. The noon report today showed wholesale beef prices firmer, with Choice up $1.27 to $308.12, while Select gained 44 cents to $280.13. Movement at midday was good at 97 loads. The Choice-Select spread is $27.99.
Well below-average temperatures are expected through a large portion of the Plains into early next week, likely stressing cattle. World Weather Inc. today said a round of precipitation will occur Saturday through Sunday involving rain, freezing rain, sleet, and snow. This combined with well-below-average temperatures will likely lead to livestock stress. There may be a lot of feedlot cattle caught without a good winter coat of hair on their hide.
30-day outlook: Feedlot marketings remain current and wholesale prices rose to six-week highs this week. USDA’s latest Cold Storage report indicated a surprisingly large September increase in beef stockpiles, but that followed a rare substantial downward revision to the August total. The latest publication of weekly slaughter numbers from two weeks ago reported steer dressed weights at 927 pounds, up five pounds from the week prior and three pounds over year-ago. The sizeable seasonal gains have raised doubts about feedlot industry currentness.
90-day outlook: The U.S. economy continues to outperform marketplace expectations, but that’s being read as bearish by the U.S. stock and financial markets as the S&P and Nasdaq futures hit multi-month lows this week. Rising Treasury bond yields mean higher borrowing costs for businesses and consumers. These macro-economic developments do not bode well for demand for beef at the meat counter in the coming weeks—especially with retail beef prices already at historically elevated levels.
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 November.
