Hogs
Price action: August lean hog futures closed 2.5 cents lower to $88.425 and settled near mid-range. July futures went off the board 5 cents lower at $88.65.
Fundamental analysis: Lean hog futures sustained modest selling pressure most of the session as bullish momentum stalled out near technical resistance, though prices rebounded in afternoon trade. August futures finished last week strong though downtrend line resistance capped gains Friday and selling pressure persisted today, though losses were limited. July futures went off the board at noon today at $88.65, a modest premium to the CME lean hog index, which was most recently quoted at $88.38, as of July 11. July futures will cash settle against the index’s quote for today, released on Wednesday. Traders are apparently anticipating a modest increase in the index in the next few days. The preliminary calculation places the index up 4 cents to $88.42 tomorrow. August futures are trading at a modest discount and gains last week stalled out right about where the index is currently. As prices struggled to trade above the index, it is apparent traders do not anticipate strength returning to the index, though just how much weakness will be sustained over the coming month is very much open to question. That uncertainty is likely to keep the downside intact on deferred futures, barring any breakdown in cash prices.
Wholesale pork prices were down 19 cents at midsession to $98.65. Hams led the way lower, falling $6.15, though price action was varied between cuts, as ribs posted a $5.17 gain. Wholesale pork prices have stabilized over the past week, supported by primal bellies as BLT season is in full swing.
Technical analysis: August lean hog futures traded on both sides of unchanged before closing slightly lower on the day. Bears still hold the near-term technical advantage, though bears are challenging downtrend resistance stemming from mid-June. Initial resistance stems from the 20-day moving average at $89.125, which is reinforced by the psychological $90.00 mark, then the July 5 high of $90.75. Support at the 10-day moving average, currently at $88.125, limited losses today. Further selling finds support at $86.725.
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 fell 25 cents to $182.125 and nearer the session low. August feeder cattle closed up $0.125 at $258.775 and near mid-range.
Fundamental analysis: The cattle futures markets saw quieter starts to the trading week. Feeder cattle futures have led the recent rebounds in prices, partly due to the recent sell offs in corn and soybean meal futures prices. The discount live cattle futures hold to the cash market is around $12.00, which may limit the downside in cattle futures in the near term.
Last week’s average cash cattle trading price is $194.24, down $2.85 from the week-prior but better than last week’s early-week cash cattle trading action. We expect cash cattle trade this week to occur at steady-weaker levels and may take place as late as Friday afternoon, as the monthly USDA Cattle-on-Feed report is due out early Friday afternoon.
Today’s noon boxed beef report showed mixed cutout values, with Choice falling 65 cents to $321.41, while Select rose $1.01 to $303.32. Movement at midday was light at 42 loads. The Choice-Select spread is presently $18.09. The recent weakness in beef cutout values has put estimated packer margins into the red, which may limit packers’ willingness to bid up for cattle at near-record-high prices.
World Weather Inc. today said high temperatures in the Plains states will stress livestock in that region early this week.
Technical analysis: The live cattle futures bulls have the overall near-term technical advantage. However, a three-month-old uptrend on the daily bar chart is in some jeopardy. A bear flag pattern has also formed on the daily bar chart. The next upside price objective for the bulls is to close August futures above solid resistance at the July high of $188.25. 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 $183.375 and then at $184.00. First support is seen at the July 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 the May high of $264.95. The next downside price objective for the bears is to close prices below solid technical support at the July low of $253.45. First resistance is seen at today’s high of $260.25 and then at $262.00. First support is seen at today’s low of $257.95 and then at $257.00.
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 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.