“Record Cash Cattle Prices Drive Market Higher as Hogs Battle Volatility
The cattle market continues its bullish run, with reports from news sources that cash prices are trading as high as $205 per hundredweight in some regions. This unprecedented strength reflects the impact of tight supplies and strong packer demand. According to USDA data, the U.S. cattle herd remains at its smallest level since 1951, which has significantly reduced the number of market-ready cattle. Frozen beef stocks are also below the five-year average, underscoring the limited supply (USDA Market Report).
Live cattle futures have surged in response, with February contracts trading above $198. The market is further supported by robust consumer demand, with retail beef sales increasing by 9% in 2024, as reported by The Wall Street Journal. Despite record-high prices, consumers continue to prioritize beef, reflecting strong domestic spending power (WSJ Article). Adding to the supply challenges, frigid weather in key cattle-producing states has disrupted grazing conditions, further limiting beef production and supporting prices.
In the hog market, February lean hog futures dipped to $78.50 earlier in the week but were bolstered later by what appears to be a short-covering rally. As traders unwound short positions, prices regained some ground. However, broader pressures remain, including the strength of the U.S. dollar index futures market which is trading above 109. This elevated dollar index makes U.S. pork exports more expensive, potentially dampening global demand (Trading Economics).
The strong dollar is an overarching challenge for both cattle and hog markets. While domestic fundamentals remain highly supportive for cattle, elevated currency levels could cap export growth. For hogs, the interplay between short-term technical rallies, such as the recent short covering, and longer-term challenges like the strong dollar, creates a mixed outlook.
In my opinion, the strength of cash cattle prices, reaching as high as $205, underscores the severe supply constraints in the market. While the short-covering rally provided some relief in the hog market, sustained gains may require a weakening dollar or an improvement in export dynamics. For now, the cattle market remains firmly in the driver’s seat, while hog traders navigate a more volatile and uncertain landscape.
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John S. Simpson Jr Senior Market Strategist Walsh Trading
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