Hogs
Price action: August lean hog futures firmed 37.5 cents to $91.65 though the contract closed nearer session lows.
Fundamental analysis: Nearby lean hog futures saw tepid buying today though deferred contracts posted strong gains as strength in pork cutout gives traders confidence an interim low could be in place. Pork cutout broke above $100.00 yesterday for the first time since June 14 and cutout was quoted up another 39 cents to $101.26 at midsession today. Hams have led the way higher, but firming belly values as BLT season is in full swing could continue to support wholesale pork. Grocers have retained high pork prices throughout this year with last week’s CPI data indicating more of the same. If grocers begin pork features, taking advantage of the lull in beef demand, the hog complex could continue to be supported by strong consumer demand in the near future. The CME lean hog index is up 20 cents to $88.62 as of July 15, marking the second consecutive daily gain. The preliminary calculation puts the index up another 18 cents to $88.80 tomorrow. While the index has only gained 42 cents in the recent bounce, traders have begun adding long positions and have driven deferred prices higher, indicating traders believe that pork demand could improve despite the bearish seasonal tendency to bleed lower in late summer and early fall.
Technical analysis: August lean hog futures closed higher on the day but settled near midrange. Prices have negated the downtrend from April and the near-term outlook is supportive of steady to higher prices. Initial resistance steams from the June 18 high of $92.425 with additional buying seeking to overcome stiff resistance at the psychological $95.00 mark. Meanwhile, tentative support stands at the 40-day moving average, currently at $91.60, with firmer backing from support at $90.25 then the 20-day moving average at $89.20.
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: Rebounding live cattle futures supported the livestock complex Wednesday. Nearby August live cattle surged $1.60 to $184.275, but August feeder futures skid 7.5 cents to $258.55.
Fundamental analysis: Cash prices for fed cattle are expected to decline again this week, with early confirmation on that point coming Monday and Tuesday. The USDA reported 679 head traded at $187.70 yesterday. Having them trade in Kansas indicates a weekly drop of 86 cents. That decline was similar to Monday’s dip in Iowa prices from last week’s $196.83 average to $195.68 as 229 head changed hands. The industry expects generally light trading through Friday morning, since the monthly USDA Cattle on Feed report is set for release at 2:00 p.m. CDT that afternoon. June feedlot marketings are expected to fall 8.3% below year-ago levels, but the big drop essentially reflects the fact that June 2024 had two fewer workdays than did June 2023. June placements are seen falling 2.8% below year-ago, with the net result being a July 1, 2024 cattle on feed population at 11.327 million head, up 1.1% from year-ago.
Wholesale prices slipped again this morning, with Choice cutout coming in $1.18 lower at $318.08. But we would point out that this latest quote is still above the bulk of those seen during the first six months of the year. Last week’s CPI data indicates grocers only raised June retail beef prices an average of 5.1% annually, which is low by the standards of the past 2-3 years. Steak prices rose just 2.7% annually and actually declined 0.9% from May. This is a big reason we remain guardedly optimistic about the cattle and feeder outlook. That’s also true for live cattle futures, which remain significantly discounted below the latest cash quotes (especially in the north).
Feeder futures are also trading below the CME feeder index, which jumped over $3.00 last Thursday and remains above $261.00. Continued corn weakness and the slow turning of the cattle cycle look likely to keep the yearling market well supported.
Technical analysis: Bulls still own the short-term technical advantage in August live cattle futures, especially after the contract vaulted higher from solid support today. Bears proved unable to force a close below the recent confluence of the contract’s 40-day moving average and short-term uptrend line (near $181.89 and $181.75, respectively), with today’s rebound seemingly opening the door to followthrough gains. Look for added support around the May 21 high at $180.50, then at the psychological $180.00 level. Today’s high marks initial resistance at $184.575, with likely psychological backing at $185.00, then at the June 24 high of $185.525. A push above those points would have bulls targeting the recent high at $188.25.
The technical situation between August feeder cattle bulls and bears seems roughly balanced. Bulls proved unable to force a move above the contract’s respective 40- and 20-day moving averages at $258.84 and $259.05 today. Expect added resistance at Monday’s high of $260.25, then at the July 3 high of $263.90. Conversely, despite proving able to force a close below the contract’s 10-day moving average near $258.46, bears couldn’t prevent a substantial rebound from initial support at the daily low of $256.75. A drop below that point would have bears targeting the psychological $255.00 level, then last 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.