Hogs
Price action: Hog futures rebounded strongly from mid-session losses Thursday, with nearby August futures ending the day unchanged at $93.775.
Fundamental analysis: Concerns about a near-term top in cash hog prices emerged again Thursday morning despite continued signs of cash and wholesale strength. For example, the CME confirmed Tuesday’s quote for the hog index had climbed 69 cents to $90.77. In addition, Wednesday’s preliminary figure indicated another rise of 62 cents to $91.39. Even more supportive of the short-term outlook was having pork cutout following Wednesday’s late rise to $104.76 with this morning’s $2.33 surge to $107.09. And unlike the gains often posted during the second quarter, the rise didn’t depend on a big one-time surge in pork belly values. Today’s strength reflected across-the-board gains by the various cuts, with a jump in pork butt values being the main driver of the rise. As pointed out in the past, hog slaughter will likely remain seasonally low through the first week of August. That fact, along with signs of renewed demand strength seem likely to continue supporting the market in the short run, which in turn seems to justify the premium built into the August contract (which expires August 14).
Technical analysis: Today’s August futures action confirmed the short-term technical advantage currently held by the market bulls. Bears proved unable to force a drop below the top side of the chart gap created by Tuesday’s upward surge (with the day’s low coming in at $92.70). Expect added support at the bottom of that gap, at Monday’s high of $92.475. Further support is layered between the 10-day moving average near $91.62, down to the psychologically important $90.00. Price action over the past three days indicates considerable resistance culminating at today’s high of $94.325. Expect added resistance at $95.00, then at the June 3 high of $97.375.
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 August.
Cattle
Price action: August live cattle rose $2.00 to $188.90, near the session high and hit a nine-month high. August feeder cattle closed up $1.50 at $258.625 and nearer the session high.
Fundamental analysis: The cattle futures markets surged today, led by live cattle, on technical buying. A solid rebound in the stock market today, following this week’s steep dive, was also a bullish outside-market element for cattle futures. Cash cattle fundamentals remain overall bullish. Consumer and retailer demand for beef remains solid.
The noon report today showed wholesale boxed beef cutout values firmer, with Choice up 40 cents to $313.08, while Select gained $1.36 to $295.32, taking the Choice/Select spread to $17.76. Movement at midday was decent at 71 loads. Cash cattle trading activity this week has not yet fully developed. A few hundred head of fed cattle traded in the $187.00 (Kansas) to $188.00 (Texas-Oklahoma) range earlier this week. The average price was $187.25 and marked a $2.46 weekly drop from early trading in the north last week.
There is a major heat wave in the northern Plains states that will last into the coming days. World Weather Inc. today said “extreme heat will occur in Montana and the western Dakotas today with some extremes of potentially 110 Fahrenheit and a little higher. …The extreme temperatures will cause livestock stress,” said the forecaster.
USDA this afternoon will release its latest monthly cold storage report. The five-year average is a 5.4-million-lb. decline in beef stocks.
Technical analysis: The live cattle futures bulls have the solid overall near-term technical advantage and gained more power today. A 3.5-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 contract high of $192.45. The next downside technical objective for the bears is closing prices below solid technical support at the July low of $180.825. First resistance is seen at $190.00 and then at $191.00. First support is seen at today’s low of $186.775 and then at $185.00.
August feeder cattle prices scored a bullish “outside day” up on the daily bar chart today. The 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 the July high of $263.90. 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 $260.00 and then at $261.00. First support is seen at $257.00 and then at today’s low of $255.475.
What to do: Get current with feed advice. Carry all production risk in the cash market for now.
Hedgers: 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 August.