Hogs
Price action: October lean hog futures plunged $3.375 to $74.825 though settled off session lows. Nearby August futures sunk $2.025 to $91.45.
Fundamental analysis: Lean hog futures gapped lower and saw extensive selling pressure throughout the session, led lower by the fall and early winter contracts. After posting strong gains much of last week, hog futures started the week off on a weaker note, facing sustained selling pressure despite continued contra-seasonal strength in the cash market. The CME lean hog index is up another 46 cents to $91.85 as of July 25 and the preliminary calculation puts the index up another 44 cents to $92.29 tomorrow. That would match the May 16 for-the-move high for the index. August futures closed today below the cash index, indicating traders are expecting the recent strength in the cash index to wain before the contract’s expiration on August 14, two weeks from this Wednesday. Meanwhile, pork cutout firmed $2.44 to $107.61 at midsession, which would mark a fresh for-the-move high if sustained through afternoon trade. Hams and ribs posted losses, while every other cut posted gains this morning, led by a $13 jump in bellies.
Technical analysis: October live cattle futures underwent heavy selling pressure today, negating most of last week’s gain. Any followthrough selling would render the technical advantage to the bears. Initial resistance stands at $75.70 with further buying seeking to overcome the 40-day moving average at $76.25. Support stems from today’s low of $74.45 with further selling seeking to take out support at $73.90.
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: October live cattle fell $1.75 to $186.80 and nearer the session low. October feeder cattle closed down $3.10 at $255.20 and nearer the session low.
Fundamental analysis: Profit taking was featured in October live cattle futures after prices late last week hit a nine-month high. October feeders saw some chart-based selling pressure today. Cash market fundamentals remain overall solid, which should limit the near-term downside potential for cattle futures. Cash cattle trade last week averaged $195.21, up $1.54 from the previous week and ending a three-week string of weaker average cash cattle prices on the week. We expect cash cattle trading to occur late this week. Expected bigger show lists this week may give the packers the edge when cash trading does commence later this week.
The noon report today showed wholesale boxed beef cutout values mixed, with Choice down 2 cents at $313.75, while Select rose $2.61 to $300.07. Movement at midday was good at 80 loads, suggesting continued better consumer demand for beef at the meat counter, despite seasonal patterns suggesting consumer beef demand tapers off after the Fourth-of-July holiday. The Choice-Select spread at midday narrowed to $13.68.
On the bearish side, August live cattle futures continue to trade at a solid discount to the cash market, presently around $7.00, to suggest trader pessimism about the cattle markets heading into the end of summer.
Technical analysis: The live cattle futures bulls still have the solid overall near-term technical advantage. 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 October futures above solid resistance at the contract high of $194.675. The next downside technical objective for the bears is closing prices below solid technical support at $183.00. First resistance is seen at the July high of $189.50 and then at $190.00. First support is seen at today’s low of $186.95 and then at $186.00.
October feeder cattle futures prices scored a technically bearish “outside day” down 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 October futures prices above technical resistance at the July high of $264.50. The next downside price objective for the bears is to close prices below solid technical support at the July low of $254.00. First resistance is seen at $258.00 and then at today’s high of $259.325. First support is seen at $255.00 and then at $254.00.
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.