GENERAL COMMENTS:
Cattle and feeder cattle prices are both trading lower at midday Friday with ongoing pressure from concerns about avian influenza, while lean hog prices continue to benefit from increased packer demand.
LIVE CATTLE:
Here at the end of the week, June live cattle futures are trading down $2.15 at $173.70, staying below the 100-day average near $176.30. On Thursday, cash trade was mostly $297 to $298 in the North, while the South remains quiet, looking for business to develop on Friday.
Likely responding to the recent news of avian influenza in some dairy cattle in six states, it has been the demand side of the market that has seen the most bearish capitulation this week. Friday morning's report from USDA showed choice boxed beef a penny higher at $297.16, but down from $306.72 last Friday afternoon. Selects were quoted down 94 cents at $295.11 with 82 total loads for the morning.
So far this week, the slaughter pace is down 9,000 from last week, but should finish close to last week's pace. Dow Jones estimated Friday's cattle slaughter at 115,000, up from 100,000 a week ago. Thursday's weekly export sales report added 18,700 metric tons of beef to the sales total, thanks to leading purchases from South Korea and Japan. So far in 2024, actual beef exports are down 5% from a year ago.
On Friday, the radar is mostly clear for the central and western Plains with mild to warmer temperatures expected. Red flag warnings and high wind warnings are in effect from North Dakota to Texas as wildfires remain a threat in the region. Thursday's U.S. Drought Monitor shows some abnormally dry areas and moderate drought in parts of the central and western Plains, but we have to go back to 2020 to see a map with fewer threats of dry weather at this time of year. There are chances for rain in the western Plains over the weekend into next week.
FEEDER CATTLE:
May feeder cattle are trading down $4.77 at $239.10, on track for a lower weekly close after Monday's $6.02 drop amid ongoing concerns about avian influenza. If Friday's May price stays below 100-day average near $244.00, it will continue to discourage specs from the long side of the market, but it is the cash market where the more reliable indications are found. The CME Feeder Index was pegged at $249.90 Wednesday, up 91 cents on the week and well above the April futures price.
It remains to be seen if concerns about avian influenza will evolve into something more serious, but at the moment, this is looking like a minor health concern with no threat to the safety of milk or beef supplies. Vets and health officials continue to monitor the situation and there is always more to learn, but to date, traders' fears far outweigh actual damage.
If influenza fears stop being fed by new headlines (and that is a big "if"), the price outlooks for both live cattle and feeder prices remain bullish. Keep in mind, USDA's January inventory report showed 13.28 million calves under 500 pounds, the lowest total in decades. Technically speaking, May feeder cattle are on track to close below the 100-day average near $244.00 and show no sign yet of shaking off traders' influenza worries.
LEAN HOGS:
June lean hogs are trading up $2.27 at $107.27, on their way to posting a bullish weekly gain and new one-year high Friday. This week's bullish action after last Thursday's bearish inventory report from USDA suggests the current level of demand for hogs is the stronger factor. Friday morning's report from USDA showed the national average of negotiated hogs at $87.12 and swine formula prices at $86.74, both at their highest prices since August 2023. The CME Lean Hog Index was projected at $85.88 for Wednesday, up $1.24 from a week ago.
In the first four days of this week, hog slaughter is down 117,000 from the previous week. Dow Jones estimates Friday's hog slaughter at 486,000, up from 446,000 on Good Friday last week. Friday morning's report of pork cutout values were up 22 cents at $98.37, the highest since August 2023 and helped by an $8.40 jump in the price of ham. Technically speaking, June hog prices are trading at their highest June prices in over a year and a possible target is the 2023 high at $109.12.
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