Hogs
Price action: Expiring July hog futures edged up 10 cents to $88.55 Thursday, while most-active August recovered a major portion of Wednesday’s breakdown. It jumped $2.00 to $86.675.
Fundamental analysis: Traders seemingly hold divergent views about the late summer and fall outlook for the hog and pork complex, as was best indicated by yesterday’s $3.00-plus dive in August hog futures and today’s huge rebound. The July contract goes off the board at noon next Monday, so traders are not eager to push it very far in either direction, especially with the CME lean hog index seemingly stabilizing. That is, the cash equivalent price confirmed yesterday’s preliminary reading (for Tuesday) at $88.67, up 24 cents, with today’s calculation for Wednesday skidding two cents to $88.65.
We still think seasonally strong consumer demand for bacon amidst BLT season will continue supporting the hog and pork complex over the next few weeks, but comparatively large frozen pork belly stocks are likely to limit the markets’ short-term upside potential. And while hog slaughter and pork production will remain seasonally low through July, they accelerated after several packers give their workers a floating holiday the first Monday in August. We think significant strength in the hog and pork complex during the second half of the year will require grocers to lower retail pork prices and feature pork products more actively. But we doubt they’re going to do that.
Technical analysis: Bears still own the short-term technical advantage in August lean hog futures, but today’s action certainly weakened their dominance. Expect initial support at the psychological $85.00 level, then at yesterday’s low of $84.675, with stronger backing from today’s low at $83.675. A follow-through drop would have bears targeting the psychological $80.00 level. Initial resistance at today’s high of $87.625 is closely backed by Tuesday’s high at $87.875, the downtrend line drawn across spring highs near $88.00, then by the contract’s 10- and 20-day moving averages near $88.43 and $88.88, respectively.
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 soymeal needs covered in the cash market through mid-August. You should have all corn-for-feed needs covered in the cash market through July.
Cattle
Price action: August live cattle closed steady at $182.25 and near mid-range. August feeder cattle rose $1.80 at $256.15 and near the daily high.
Fundamental analysis: The cattle futures markets today saw short covering, led by feeders, following recent steep losses that have produced some chart damage. Cash market fundamentals are also deteriorating a bit. Today’s noon report showed wholesale beef cutout value down for a third straight day, as Choice fell 68 cents to $323.37, while Select dropped 70 cents to $303.24. Movement at midday was good, however, at 80 loads, indicating solid grocer demand and suggesting still-strong consumer demand despite seasonal tendencies for demand to taper off after the Fourth-of-July holiday. The Choice-Select spread is presently at $20.13.
In the cash cattle market the string of record highs in the fed cattle weekly average price is likely to end this week. Cash cattle trade was fairly active Wednesday. The total number traded and reported to USDA was 13,212 head, with an average price of $195.33. Prices in the northern markets held around $198.00 yesterday, whereas trading in the Southern Plains averaged around $189.00. Cash cattle prices set a record average high at $197.09 during the week of Independence Day.
USDA this morning reported net U.S. beef sales of 8,300 MT for 2024, a marketing-year low and down 46% from the previous week and 43% from the four-week average.
World Weather Inc. today said next week in the Plains states higher livestock stress is expected due to hot temperatures in the region.
Technical analysis: The live cattle futures bulls still have the overall near-term technical advantage but have faded recently. A three-month-old uptrend on the daily bar chart is in jeopardy. A bear flag or pennant pattern may also be forming on the daily bar chart. The next upside price objective for the bulls is to close August futures above solid resistance at the contract high of $192.45. The next downside technical objective for the bears is closing prices below solid technical support at $178.00. First resistance is seen at today’s high of $183.125 and then at $184.00. First support is seen at this week’s low of $180.825 and then at $180.00.
The feeder cattle futures bulls and bears are on a level overall near-term technical playing field. The next upside price objective for the feeder bulls is to close August futures prices above technical resistance at $261.00. 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 $257.00 and then at $258.00. First support is seen at today’s low of $254.95 and then at this week’s low of $253.45.
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 soymeal needs covered in the cash market through mid-August. You should have all corn-for-feed needs covered in the cash market through July.