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CME: Cattle, Hog Futures Markets Pointing to Higher Prices in 2017

07 November 2017

US - Cattle and hog prices jumped up last week in the cash market and across all the futures market months for the balance of this year and throughout 2018. Both futures markets and current livestock price levels are dramatically different than a year ago, reports Steiner Consulting Group, DLR Division, Inc.

Note that Friday morning in Kansas, USDA’s Agricultural Marketing Service (Market News) showed quite a few Live Fed Steers traded at $126.00 per cwt., so the preliminary weekly average we calculated and in the provided graphic may be revised higher. At the end of this page is a summary of Market News weekly reports on production and cash prices.

 

Using the average of the daily closing prices, last week the December 2017 Live Cattle (fed) contract was $125.45 per cwt., surging $6.08 for the week. Since mid-September, the December contract has increased $13.08 per cwt. The May 2018 fed contract averaged $127.71 per cwt. (up $3.45 week-over-week).

Feeder Cattle contracts also posted price gains for the week: November 2017 was $159.25 per cwt. (up $3.51 for the week); March 2018 was $156.25 (up $4.47); and August 2018 averaged $156.63 (gaining $4.69). The March contract is up $11.49 per cwt. since mid-September, a level worth studying for those grazing winter wheat.

Lean Hog prices strengthened last week and provide opportunities for producers to lock-in profits. For the week, the December 2017 contract averaged $66.14 per cwt., $1.83 above the prior week. Since mid-September, that contract has increased $8.64 per cwt. The May 2018 contract was $79.54 per cwt., up $1.58 for the week.

Year-over-year, livestock futures market prices are dramatically higher. The December 2017 Live Cattle contract last weak was up $21.25 per cwt. compared to 2015’s. and the April contract for next year was up $22.69. Feeder Cattle futures in 2018 for the March and August contracts last week were $40.62 and $42.10 above a year ago, respectively. Compared to a year ago, the Lean hog contracts last week for December of this year and May 2018 were $19.06 per cwt. and $10.86 higher, respectively.

Last year at this time, futures markets, especially for cattle, were signaling to meat buyers for retail stores and restaurants that prices would remain rather low and there appeared to be opportunities to buy out-front for features and special promotions. Also, a year ago, after struggling with high feeder cattle prices for many months, cattle feeders began to see much better prospects for profits on animals being placed on-feed, even with languishing Live Cattle futures prices.

Given the fundamental price structures and the levels today, are cattle prices likely to match the huge prices increases posted from early-November 2016 into the spring months of 2017? For key contract months, let’s look back at that timeframe for some context.

One year ago (week ending 4 November 2016), the April 2017 Live Cattle contract average was $105.02 per cwt. At contract expiration, that contract had surged to $132.89. From early-November 2016 to contract expiration for the March 2017 Feeder Cattle contract the price increased from $115.63 per cwt. to $132.65.

Turning to the Lean Hog contract, between early-November 2016 and the expiration of the May 2017 contract, the price increase was $2.26 per cwt. (from $68.68 to $70.94).

Futures markets are pointing to higher cattle and hog prices than a year earlier. Looking just a at prices in recent weeks as a starting point, 2018 likely will not unfold like 2017.


Daily Livestock Report - Copyright © 2008 CME. All rights reserved.


TheCattleSite News Desk

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