Hogs
Price action: October lean hog futures firmed 35 cents to $74.325 and settled nearer session highs. August futures rose 22.5 cents to $90.025, while deferred contracts posted losses.
Fundamental analysis: Lean hog futures gapped lower this morning but grinded higher throughout today’s session, supported by rebounding wholesale pork values. The CME lean hog index is down 90 cents to $91.90 as of August 8, the fifth consecutive daily decline and the biggest drop since September of last year. Packer submission problems delayed data required for the preliminary calculation, though another decline is expected. Traders seem to anticipate continued weakness into the August contract’s expiration on Wednesday, as August futures finished the day at a $1.875 discount to the CME lean hog index, which it will cash settle against on Friday. The steep discount maintained in fall and early winter futures continues imply sustained weakness this fall, which we continue to believe is overdone, especially considering the recent strength in pork cutout. After falling most of last week following the early August peak, pork cutout bounced Friday and continued higher this morning, rising $2.20 to $100.86 at midsession, led by gains in bellies, loins and butts. Movement was strong this morning at 191.55 loads, continuing to show robust grocer demand for pork.
Technical analysis: October lean hog futures closed higher for the second day in a row, though settled below downtrend resistance which has capped all gains since the July peak. Bears retain the near-term technical advantage and are seeking to keep prices below downtrend resistance at $74.85. Strength above that mark would have bulls eyeing resistance at $75.00, then last week’s high close at $76.40. Support stems from $74.00 with further selling finding support at last week’s low of $72.35.
What to do: Get current with feed advice. Carry all production risk in the cash market for now.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all corn-for-feed and soymeal needs covered in the cash market through August.
Cattle
Price action: October live cattle fell $1.125 to $180.025 and near the session low. October feeder cattle closed down $2.05 at $237.725 and nearer the session low.
Fundamental analysis: Technical selling from the speculators was featured today as the chart postures for both live and feeder cattle futures markets have deteriorated recently. Cash market fundamentals are also weakening a bit. Last week’s average cash cattle trading price was $191.34, down $3.11 from the week prior and the lowest average price since early June. We look for this week’s cash trade to come in steady-weaker and likely occurring late in the week. Packer margins are in the red and may discourage packers from bidding up for cash cattle later this week. Futures are still at steep discounts to the cash cattle market, which may limit seller interest in futures in the near term.
Today’s noon report showed Choice-grade boxed beef prices rose $2.51 to $315.22 and Select-grade up $1.32 to $299.91, taking the Choice-Select spread to $15.31. Movement at midday was light at 46 loads.
Overall consumer demand for beef at the meat counter is still good. Traders will be gauging how aggressive grocers are in featuring beef the next few weeks and how consumers respond. Retailers have so far kept retail beef prices from rising despite cash cattle and wholesale beef prices trading at elevated levels much of this year.
Technical analysis: The live cattle futures bears have the slight overall near-term technical advantage after the recent steep price downdraft. The next upside price objective for the bulls is to close October futures above solid resistance at $184.00. The next downside technical objective for the bears is closing prices below solid technical support at the August low of $176.35. First resistance is seen at today’s high of $181.50 and then at $182.50. First support is seen at $179.00 and then at $177.50.
The feeder cattle futures bears have the solid overall near-term technical advantage. Prices are in a steep two-month-old downtrend on the daily bar chart. The next upside price objective for the feeder bulls is to close October futures prices above technical resistance at $242.55—the top of last week’s downside price gap on the daily bar chart. The next downside price objective for the bears is to close prices below solid technical support at $230.00. First resistance is seen at $239.00 and then at today’s high of $240.85. First support is seen at the contract low of $235.35 and then at $234.00.
What to do: Get current with feed advice. Carry all production risk in the cash market for now.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: You should have all corn-for-feed and soymeal needs covered in the cash market through August.