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Barchart
Barchart
Andrew Hecht

Cattle and Hogs- Animal Proteins Q3 and Beyond

In a September 10 Barchart article on the cattle futures market, I suggested that seasonality is critical for animal proteins as the demand declines when grills return to storage for the fall and winter. I concluded the article with:

While cattle futures have been trending higher since the early 2020 lows, they can experience significant price volatility. I remain bullish on cattle prices and would use any significant downside price action over the coming weeks and months as a buying opportunity for the 2025 grilling season. However, given the potential for substantial price variance, I will leave plenty of room when building long positions, as picking bottoms can be dangerous in the volatile futures arena. 

On September 10, live cattle futures for December delivery settled at $1.76425, and the feeder cattle for November delivery settled at $2.3275 per pound. Meanwhile, lean hog futures for December delivery were at the 71.15 cents per pound level. Active month prices moved higher since mid-September, but the cattle and hog futures displayed seasonal weakness in Q3, posting across-the-board declines. 

The animal protein sector fell 4.71% in Q3 but was 13.61% higher over the first nine months of 2024. 

Live cattle edged lower in Q3

Nearby live cattle futures fell 0.89% in Q3 but were 9.06% higher.

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The ten-year continuous live cattle contract settled Q3 at $1.83775 per pound. While the fat cattle edged slightly lower in Q3, the price remains elevated, not far below the September 2023 $1.9205 per pound record high. Live cattle are trading in a sideways pattern during the beginning of the 2024/2025 offseason for demand. 

Feeders decline

The price of cattle futures for animals in feedlots moved 5.05% lower in Q3 but was 10.75% higher from the end of 2023 through the end of September 2024. 

The ten-year continuous feeder cattle futures chart illustrates the price closed Q3 at $2.420 per pound. The all-time high was $2.67425 per pound in September 2023. Like the live cattle, the feeders were sitting in a sideways trend at the end of Q3, not far below the record peak. 

Cattle futures remain elevated as feed and other production costs have increased. The bottom line is that beef prices remain at high levels during the 2024/2025 offseason. 

Lean hogs lead the way on the downside in Q3

Lean hog futures underperformed the live and feeder cattle in Q3, posting an 8.18% decline. However, the hogs led on the upside over the first nine months of 2024 with a 21% increase from the price at the end of 2024. 

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The ten-year continuous lean hog futures chart shows that October lean hogs settled at 82.25 cents per pound at the end of Q3. The hogs did not trade above $1.10 per pound in 2024 and remained significantly below the 2023 $1.27325 per pound high and the $1.33425 March 2014 record peak. Hog prices are trading in a range as the market moves into the final quarter of 2024 

Prices higher than mid-September

On September 10, cattle and hog prices settled at the following levels:

  • Live cattle for December delivery were $1.76425 per pound.
  • Feeder cattle for November delivery were $2.3275 per pound.
  • Lean hogs for December delivery were $0.7115 per pound. 

On September 30, the prices had posted across-the-board gains:

  • December live cattle at $1.8480 were 4.75% higher.
  • November feeder cattle at $2.4490 were 5.43% higher. 
  • December lean hogs at $0.73275 were 2.99% higher. 

Prices were higher on October 2.

The anticipation of price weakness during the off-demand season weighed on prices in mid-September, but they recovered because of production costs and other factors by the end of the month. Since it is the beginning of the offseason and attention will not turn to the 2025 peak grilling season until late winter or early spring 2025, the potential for lower prices over the coming months remains high. 

I am a cautious buyer over the coming months on significant price weakness for the 2025 peak season

Cattle prices remain elevated, and lean hogs were the best-performing animal protein in 2024, with a 21% gain as of the end of Q3. The 2020 pandemic which pushed prices to multiyear lows, took a toll on animal protein production. Sky-high feed prices in 2022 and rising labor, transportation, and other production costs have caused overall expenses to rise, weighing on output. 

The latest September USDA World Agricultural Supply and Demand Estimates Report forecasts lower cattle and hog prices during the first half of 2025. If prices decline substantially, I am a buyer of the animal protein futures to position for the 2025 peak grilling season. However, I will leave plenty of room to add on further declines because the meat futures can be highly volatile, and prices can fall to illogical, unreasonable, and irrational levels that defy fundamental and technical analysis. 

Meat prices declined in Q3, which is no surprise as it is the beginning of the off-demand season. However, the sector’s double-digit percentage gain since the end of 2023 is a sign that production costs continue to support higher prices, and logistical issues could send them to higher highs in 2025. The long-term price trends remain favorable as the markets head into the weak winter season. 

On the date of publication, Andrew Hecht did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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