Hogs
Price action: August lean hog futures rose $0.45 to $96.35, near mid-range and for the week down 87 1/2 cents.
5-day outlook: The lean hog futures market saw tepid short covering in a bear market today. Chart-based specs are still primed to play the short side in the near term as a price downtrend remains firmly in place on the daily bar chart.
The USDA noon pork cutout was reported up $3.31 at $97.78, led by gains in cuts across the board. Movement at midday was 161.29 loads. The latest CME lean hog index is down 2 cents to $92.90. Monday’s projected CME index price is down 15 cents at $92.75. The national direct five-day rolling average cash hog price quote for today was $96.73.
30-day outlook: The start of the summer grilling season has yet to offer much support to cash hog and pork fundamentals as cutout values moved lower again this week. Pork production is up 0.3% compared to last year at this time, highlighting that no major supply story exists to help lift futures at this time, explaining the inability of hogs to capitalize on any spillover strength from cattle.
90-day outlook: Substitution demand for pork over beef may finally occur in the coming months if U.S. inflation continues to nip at the heels of household budgets and gasoline prices remain well above $4.00 a gallon.
What to do: Get current with feed coverage.
Hedgers: You have 50% of Q2 production hedged with all remaining risk in the cash market.
Feed needs: You have corn-for-feed and soymeal needs covered through July in the cash market. Be prepared to make purchases if value prices continue.
Cattle
Price action: August live cattle futures fell $1.50 to $241.175, near mid-range and for the week down 47 1/2 cents. August feeder cattle futures lost $2.225 to $357.425, near mid-range and for the week up $3.525.
5-day outlook: The cattle futures markets have turned choppy lately, as traders digest the potential ramifications of New World screwworm on the U.S. cattle industry. On up days in futures prices, it appears the potential for less cattle supplies coming to market come to center-stage. On down days in cattle futures markets, the keen uncertainty regarding the NWS matter, including consumer attitudes toward NWS, seem to prevail. Uncertainty is generally bearish in raw commodity markets.
Cash cattle trading is still very light as of midday today, with USDA reporting that steers were averaging $254.15. That compares to last week’s USDA-reported cash cattle trading average of $256.53. The noon report today showed mixed boxed beef prices, with Choice grade down $0.10 at $393.11 and Select grade up $0.73 at $373.98. Movement at midday was 58 loads. The Choice-Select spread is presently plus $19.13.
30-day outlook: The next few weeks, or longer, will likely find NWS on the front burner for the cattle futures markets. Concerns have so far leaned slightly price-friendly for cattle futures due to potentially lower U.S. beef production going forward, which is already lagging 6.5% behind last year’s pace. Bearish impacts are still possible, as inflation has now outpaced wage growth for multiple months. Despite inflation in beef cooling month-over-month, prices for the category are still up 12.9% from last year and are met by consumers that are being continually squeezed from other sectors in the economy as well.
90-day outlook: The major U.S. stock indexes have backed off their recent record highs but remain not that far below them. Any sustained selling pressure in U.S. equities could dent consumer demand for higher-price beef at the meat counter. Also, with gasoline prices at the pump well above $4.00 a gallon for a sustained period of time will also likely crimp consumer demand for beef.
What to do: You have corn-for-feed and soymeal needs covered through July in the cash market. Be prepared to make additional purchases.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: You have corn-for-feed and soymeal needs covered through July in the cash market. Be prepared to make purchases if value prices continue.