Hogs
Price action: Bulls couldn’t sustain early strength in hog futures, with the expiring July contract slipping 37.5 cents to $89.20 at the close, while most-active August tumbled $1.325 to $88.175.
Fundamental analysis: As has become rather routine in recent weeks, pork prices set back this morning in the wake of a sizeable Friday advance. The main differences between the latest moves and those often seen during May and June were that last week’s late advance started and ended at lower levels, and this morning’s decline was also more subdued. Pork cutout surged $2.99 to $97.89 last Friday, with ham and rib gains powering the rising cutout. But prices dipped 25 cents to $97.64 at midsession today. Hams and ribs, along with butt values, led the way lower.
Short-term hog and pork strength might be powered by seasonal lows in hog slaughter and pork production, since both tend to reach annual lows just before and after the Independence Day holiday. The traditional early-summer shortage is likely to be diminished by the 2% annual increase in early-summer hog supplies indicated on last Thursday’s quarterly USDA Hogs & Pigs report.
A sustained price advance will probably have to rely upon stronger consumer demand, but that seems unlikely given the manner in which grocers boosted retail pork prices during the March-May period. Given the circumstances, the discounts built into summer-fall futures seem justified.
Technical analysis: Today’s August hog futures price action confirmed the short-term technical advantage held by bearish traders. Bulls did prove able to overcome initial resistance around the contract’s 10-day moving average of $89.01, psychological resistance at $90.00 and the 20-day moving average at $90.13. but the failure at stiffer resistance near $91.17 and subsequent reversal seemingly opened up downside potential once again. Initial support is marked by today’s low of $87.85, with backing from last week’s late lows in the $87.65 to $87.60 range. A drop below that area would open the door to a test of the June 25 low of $86.225.
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 July.
Cattle
Price action: August live cattle fell $1.15 to $184.275 and near mid-range. August feeder cattle closed down $1.925 at $257.375 and nearer the session low.
Fundamental analysis: The cattle futures markets today saw profit-taking pressure from recent gains. However, cash market fundamentals remain sound, overall. Cash cattle prices last week averaged $195.81, up 97 cents from the previous week and set another record high average. That’s the third consecutive record high weekly average cash cattle trade. Cash trade this week may get an early start as packers and feedlots may try to get things done ahead of Thursday’s Independence Day holiday. We look for cash trading later this week to be steady-lower and very light. Also look for low weekly slaughter totals this week due to the Thursday holiday.
Today’s noon report showed wholesale boxed-beef cutout values higher. Choice rose $3.56 to $329.88 and Select was up $2.36 to $306.86, taking the Choice/Select spread to $23.02. Movement at midday was light at 43 loads. Today’s higher boxed beef values suggest grocers are still buying beef amid good consumer demand.
Cattle futures markets are open Friday, but many are expecting most traders to make it a four-day weekend.
Technical analysis: The live cattle futures bulls still have the solid overall near-term technical advantage. Prices are in a 2.5-month-old uptrend on the daily bar chart. The next upside price objective for the bulls is to close August futures above solid resistance at $190.00. The next downside technical objective for the bears is closing prices below solid technical support at $182.50. First resistance is seen at today’s high of $185.15 and then at the June high of $187.425. First support is seen at today’s low of $183.625 and then at $182.00.
The feeder cattle futures bulls still have the overall near-term technical advantage. The next upside price objective for the feeder bulls is to close August futures prices above technical resistance at the May high of $264.95. The next downside price objective for the bears is to close prices below solid technical support at the June low of $250.80. First resistance is seen at today’s high of $259.175 and then at $260.00. First support is seen at today’s low of $256.40 and then at $255.00.
What to do: Get current with feed advice. Carry all production risk in the cash market for now.
Hedgers: Get current with feed advice. 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 July.