Hogs
Price action: August lean hog futures rallied 80 cents to $92.375 and settled near session highs. Deferred contracts posted stronger gains.
Fundamental analysis: Lean hog futures continue to show impressive strength, led by contra-seasonal strength in the cash markets. Agricultural commodities as a whole today saw a bid, building on corn and soybean strength overnight. After posting an early top in May, the CME lean hog index has rebounded $1.33 from the July 11 low. The index is up 44 cents to $89.71 as of July 18, the fifth consecutive daily gain and the highest quote since June 26. The preliminary calculation puts the index up another 9 cents to $89.80 tomorrow. August futures are now trading $2.665 above the index, which could limit buying interest, especially considering stagnating gains in the index. Wholesale pork prices are just as supportive, surging $2.70 to $104.86 at midsession, which would be the highest quote since last August if gains are sustained through afternoon trade. Cutout continues to be supportive of the pork complex as grocer demand has elevated prices, a factor we reported could stop the onset of early seasonal weakness the past couple of months. Bellies led the way higher this morning as BLT season is in full swing, though ham and picnics posted strong gains as well.
Technical analysis: August lean hog futures surged today, building on recent strength. A near-term low looks to be in place as neither bull nor bear own the near-term technical edge. Resistance stems from the July 17 high of $92.575 with little added resistance until the psychological $95.00 mark. Bulls are seeking to keep prices above 40-day moving average support at $91.60, though further selling would find support at $90.75, then the 20-day moving average at $91.15.
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 rose 82 1/2 cents to $183.925 and near mid-range. August feeder cattle closed up 80 cents at $256.40 and nearer the session low.
Fundamental analysis: The cattle futures markets were supported today by a slightly friendly USDA’s monthly Cattle-on-Feed Report released last Friday afternoon. The report showed large U.S. feedlot inventories at 11.304 million head as of July 1, up 61,000 head (0.5%) from year-ago but 23,000 head less than the average pre-report estimate. June placements on feed were down 6.8%, while marketings dropped 8.7%--both down more than expected.
Last week’s average cash cattle trading price was $193.67, down 57 cents from the previous week and down $3.42 the past couple weeks from the record high. We expect cash trading this week to come in steady-weaker.
The noon report showed wholesale boxed beef cutout values mixed, with Choice falling 15 cents to $313.68, while Select rose $1.29 to $300.09. Movement at midday was 72 loads. The Choice-Select spread narrowed to $13.59.
World Weather Inc. warns that livestock stress in the Plains and northern Plains states will occur in the coming days due to high temperatures. “Hot temperatures in western areas will be particularly extreme Wednesday through Friday,” said the forecaster.
Technical analysis: The live cattle futures bulls have the overall near-term technical advantage. A three-month-old uptrend on the daily bar chart is in place. 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 $179.00. First resistance is seen at today’s high of $184.625 and then at $186.00. First support is seen at today’s low of $183.075 and then at last week’s low of $181.65.
The feeder cattle futures bulls and bears are on a level overall near-term technical playing field amid recent choppy trading. The next upside price objective for the feeder bulls is to close August futures prices above technical resistance at $260.25. 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 $258.425 and then at $259.65. First support is seen at today’s low of $255.75 and then at $254.00.
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.