Both the Cattle on Feed Report and the Hogs and Pigs Report will be released this week by USDA. These two big reports will shed valuable information on the livestock industry and should help dictate short-term price direction.
Cattle futures have been trading in a very cautious uptrend since April. For the past month, prices have traded up this trending channeling line like a rock climber slowly scaling a mountain face; aware that at any moment the grip could be lost and the fall occurs.
The cattle industry is well aware that supplies are ample. Between high slaughter levels and heavy weights, production is up. On the most recent cold storage released this week, frozen beef stocks at the end of August came in at 460.2 million pounds. This was up more than 4% for the month, yet down 2% from last year at this time.
For Friday’s Cattle on Feed Report, the on feed number is expected to come in near 103.5 (with a range of estimates of 102.2-103.9). The placement number is expected to be at 106 (with a range of estimate 100.8-110). The marketed number is pegged to be near 96.7 (with a range of estimates of 95.7-97.5). Cattle producers should be mindful of this potential large increase in production. The funds are long more than 59,000 contracts of cattle futures. Be mindful of any month end or quarter end position squaring by the funds should they deem Friday’s report bearish.
With the exceptional export demand and news of African swine fever being found in a wild boar in Germany, hog futures have been in an uptrend since August. Production is strong, well over year ago values, but because U.S. exports are also strong, the market can easily absorb the extra production levels due to the swift export pace.
In this demand-led market, exports are strong and domestic pork consumption has also been steady. The most recent Cold Storage report showed that frozen stocks of pork for the month of August came in at 467.7 million pounds. This was up more than 1% for the month, yet down more than 20% from year ago levels.
The All Hogs and Pigs inventory is expected to come in at 100.1% of a year ago (with a range of estimates of 96.9-102.6) in the Sept. 24 report. The kept for market number is expected to come in near 100.6% of a year ago (with a range of estimates of 96.9-103). The kept for breeding category is expected to come in near 97.5% (with a range of 96.7-98.9).
Barring any bearish surprises in the report, due to strong export demand, hog futures appear to be able to hold the recent price gains. It will take continued strong export news in the weeks and months ahead to keep prices steady to higher. The Chinese hog herd is rebuilding quickly, so at some time the strong U.S. export pace may lose its luster, but for now the outlook continues to be optimistic.