Hogs
Price action: August lean hog futures rose $2.85 to $91.275 and near the session high, closing at a four-week-high close.
Fundamental analysis: Short covering and perceived bargain hunting by the speculators was featured in lean hog futures today, as premium is being built back into the front-month August futures contract versus the cash index. Technicals are starting to improve and are now suggesting the hog futures market has bottomed out, which is also inviting the bargain hunters to the long side of hog futures.
The projected CME lean hog index price for Wednesday is up 20 cents at $88.62. Today’s noon report showed pork cutout value rose $2.48 to $100.77, driven by a $7.32 gain in hams, though all cuts except picnics posted gains this morning. Movement at midday was 158.51 loads.
Hog market bulls are hoping the seasonally stronger consumer demand for bacon at the height of BLT season, along with lower early-summer slaughter levels, will support the hog and pork markets in the short term. However, hog supplies and slaughter levels usually start rising after the first week of August.
Technical analysis: The lean hog futures bears still have the overall near-term technical advantage. However, a price downtrend on the daily bar chart has been negated to suggest a near-term market bottom is in place. Bulls have gained upside momentum. The next upside price objective for the hog bulls is to close August prices above solid chart resistance at $92.50. The next downside price objective for the bears is closing prices below solid technical support at the July low of $83.675. First resistance is seen at today’s high of $91.325 and then at $92.50. First support is seen at $90.00 and then at today’s low of $88.575.
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 futures firmed 55 cents to $182.675 and settled nearer session highs. August feeder cattle futures sunk 15 cents to $258.625.
Fundamental analysis: Live cattle futures closed modestly higher though continue to chop sideways in directionless trade. Following the breakdown early least week, August futures have traded almost entirely within the $182.00 handle. Cash cattle trade has had an expectedly slow start to the week, with 229 head trading hands in Iowa at $195.68, a little over a buck less than last week’s average for the area. Cash cattle trade is expected to remain light this week ahead of Friday’s Cattle on Feed Report. Cash cattle sources expect weaker prices this week given last week’s drop from the previous week’s record and hefty purchases by packers since the beginning of June. The recent dip in wholesale beef prices has pressured packer margins, further discouraging packers from paying up for cash cattle. Wholesale beef prices were mixed at midsession as Choice cutout fell $1.00 to $320.49 and Select firmed 60 cents to $305.42. Movement this morning was average at 55 loads.
Feeder cattle ended the day mixed as contracts out to November are all within a dollar of front month August futures. Traders have anticipated record feeder prices for much of this year. The feeder cattle index is now making fresh records and was most recently quoted 84 cents higher to $261.88. That is likely to limit much of the downside in feeder futures, though traders are hesitant to build premiums back into futures, unsure of how long the index can stay at record highs.
Technical analysis: August live cattle futures saw buying into the upper end of the recent sideways range today. Prices continue to trade in a bear flag on the daily bar chart, though lack of followthrough to the downside is brewing skepticism around additional selling pressure. Bulls are seeking to overcome resistance at $183.375, though the 10-day moving average lies en route at $183.125. Support lies at $182.00 then the 40-day moving average at $181.65.
August feeder futures saw limited selling pressure today though deferred contracts posted gains. Bulls are seeking to overcome initial resistance at $259.65, which limited gains today. Further strength finds resistance at $260.25. Meanwhile, support lies at today’s low of $257.65 then the psychological $255.00 mark.
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.