Hogs
Price action: August lean hogs rose $1.60 to $89.775 and near the session high. The expiring July contract edged up 2.5 cents to $89.225.
Fundamental analysis: The lean hog futures market today saw short covering following recent strong selling pressure. Cash market fundamentals remain weak, suggesting sustained upside price action in futures and cash may be unlikely in the very near term. The latest CME lean hog index is down another 30 cents to $89.17 as of June 28, extending the recent slide. Monday’s preliminary quote for the index was not available. The national direct five-day rolling average cash hog price quote today is $89.16. Today’s noon report showed pork cutout value rose 2 cents to $95.43, led by gains in loins. Movement at midday was 137.09 loads.
Still, the short-covering rebound in futures could continue this week as seasonal lows in hog slaughter and pork production tend to occur at this time of year. However, the early-summer pork shortage may be mitigated by the 2% annual increase in early-summer hog supplies as indicated in last week’s USDA quarterly Hogs and Pigs report. A sustained price advance in hogs would probably have to come from stronger consumer demand. But with retailers continuing to feature beef in the meat case, they’re also keeping retail pork prices at elevated levels and discouraging consumer demand.
Technical analysis: The lean hog futures bears still have the firm overall near-term technical advantage. Prices are in a more-than-two-month-old downtrend on the daily bar chart. The next upside price objective for the hog bulls is to close August prices above solid chart resistance at $93.00. The next downside price objective for the bears is closing prices below solid technical support at $85.00. First resistance is seen at this week’s high of $91.175 and then at $92.00. First support is seen at today’s low of $87.625 and then at the contract low of $86.275.
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 futures rebounded from their recent setback, rising 82.5 cents to $185.10, while August feeder futures soared $3.725 to $261.10.
Fundamental analysis: Wholesale beef prices continued their march upward Tuesday morning, with Choice beef cutout climbing $1.79 to $330.97 and Select cutout rising $1.03 to $307.44. This apparently reflects vigorous demand from grocers and consumers rather than a beef shortage, since recent cattle slaughter and beef production totals have essentially matched the mid-year highs posted last year. Conversely, they are quite small when compared to those of 2022.
As discussed previously, the ongoing wholesale advance still leaves cutouts well below the highs of recent years. For example, last year’s high for Choice cutout around $343.00 essentially matched the double-top posted in the summer of 2021, while falling far short of the approximate $475 spike-high posted amidst the Covid-driven packing industry disruptions of May 2020. We believe grocers are maintaining retail beef prices near those posted during spring, which is apparently spurring sustained buying from consumers. The wholesale strength is also encouraging packers to continue operating somewhat actively, since their margins are reportedly slightly in the black as well. The post-Independence Day period may bring reduced demand, which is probably the reason futures traders are maintaining discounts to record high cash prices. We don’t disagree with this bias but would warn against becoming overly aggressive on the short side given the considerable size of those discounts.
Meanwhile, the latest quote for the CME feeder index, at $255.60, may have limited today’s futures gains, although that wasn’t made particularly obvious by today’s August futures’ jump above $260.00.
Technical analysis: Bulls still own the short-term technical advantage in August live cattle futures, especially after bears had no success in forcing the contract below initial support at its 10-day moving average near $184.50. That’s backed by yesterday’s low at $183.625, then by the 20-day moving average near $181.93. Expect strong psychological support at $180.00. Today’s high marked initial resistance at $185.47, but a breakout above that point would have bulls targeting last week’s high of $187.40. A push to higher levels would likely have bulls looking to target $190.00.
Today’s action reinforced the bulls’ ownership of the short-term technical advantage in August feeder futures as well. The high-range close implies initial resistance at the daily high of $261.60 could prove tentative, thereby opening the door to followthrough tests of the June 27 and June 17 highs at $262.65 and $263.075, then the May 28 high of $264.95 and the psychological $265.00 level. Today’s move likely made the psychological $260.00 level initial support, with strong backing from the contract’s 10-, 20- and 40-day moving averages near $259.59, $258.46 and $257.76, respectively.
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.