Hogs
Price action: Big wholesale losses are undercutting hog futures. The expiring August contract slid 57.5 cents to $90.025, while most-active October tumbled 95 cents to $73.625.
Fundamental analysis: As has been widely anticipated, the CME lean hog index is slipping lower as seasonal forces, particularly increased hog supplies and diminished consumer buying, point the complex lower. The latest official quote for the hog index at $93.10 for Tuesday, down 23 cents, matched the preliminary calculation. USDA data indicates it will skid another 30 cents to $92.80 when Wednesday’s quote is officially published tomorrow.
However, the industry has probably been surprised by the weakness seen in pork cutout the past two days, especially since slaughter has not increased significantly from early-summer levels. Cutout had recently proven stable around $105.00 but fell $1.96 Tuesday and dove $3.35 to $98.35 at noon today. Big belly losses, along with slumping rib quotes, apparently powered the drop. Neither of these declines is terribly surprising, since the BLT season is likely winding down, although we suspect rib demand, and prices, will rebound as grocers make a late-summer push for Labor Day grilling features. Still, given the hog and pork market’s history of late-summer weakness, current losses aren’t too surprising. On the other hand, if we’re correct in thinking grocers are featuring pork more aggressively than they did during spring, the short-term downside may not be as poor as futures indicate.
Technical analysis: Today’s gap-lower opening gave bears a decided short-term technical advantage in most-active October lean hog futures, although the high-range close went far toward mitigating its impact. Still, today’s high of $73.875 implies stiff resistance at that level, with backing extending from yesterday’s low of $74.10 to the 40-day moving average near $74.76 and the psychological $75.00 level. Conversely, a short-term move back above the latter point would have bulls targeting the July 25 high of $78.70. Today’s low implies stout support at $72.35, with likely backing at the July 12 high of $71.30 and the psychological $70.00 level. A drop below that point would open the door to a retest of the July 10 low of $68.05.
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 $1.25 to $178.025, nearer the session low and posted a nearly three-month-low close. October feeder cattle closed down $2.125 at $236.00, nearer the session low and hit a contract low.
Fundamental analysis: Trader concerns about consumer demand for beef amid U.S. economic recession worries amid a wobbly U.S. stock market, and deteriorating cash market fundamentals, weighed heavily on cattle futures markets today. Solid gains in U.S. stock indexes today did little to dissuade bearish cattle traders from their worries about a weaker U.S. economy in the coming months.
Cash cattle trading so far this week saw quite a bit of trade occur Wednesday, with 10,415 head going at $192.46 and 216 head at $193.00—all in the northern markets. Nebraska saw 3,891 head trade at $193.11 and 216 head at $193.00. Iowa-southern Minnesota had 5,599 head trade at $192.74. These prices are above those seen early last week but mark a sizeable drop from last week’s average at $194.45, especially with southern trading yet to take place. The large discounts presently seen in deferred live cattle futures prices may encourage feedlot operators to keep marketing their cattle quickly and thus possibly limiting market-ready supplies as well as curtailing feedlot placements.
Today’s noon report showed wholesale boxed beef cutout values continued to decline, with Choice falling $1.59 to $312.26, while Select fell 61 cents to $298.22. Movement at midday was decent at 75 loads. The Choice-Select spread is presently $14.04.
USDA this morning reported U.S. beef export sales of 10,000 MT for 2024, down 43% from the previous week and 27% below the four-week average.
Technical analysis: The live and feeder cattle futures bears have the overall near-term technical advantage after the recent steep price downdrafts. The next upside price objective for the live cattle bulls is to close October futures above solid resistance at $182.50. The next downside technical objective for the bears is closing prices below solid technical support at the April low of $170.825. First resistance is seen at today’s high of $179.70 and then at this week’s high of $180.575. First support is seen at today’s low of $177.50 and then at this week’s low of $176.35.
October feeder cattle futures 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 this 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 the contract low of $235.575. First resistance is seen at $240.00 and then at today’s high of $242.40. First support is seen at today’s contract low of $235.45 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.