Hogs
Price action: August lean hogs closed down $1.125 at $88.40 and near the session low.
Fundamental analysis: Winter-month contracts led lean hog futures lower today amid deteriorating cash market fundamentals. The latest CME lean hog index is down 44 cents at $88.76 as of July 5 and the lowest level since April 9. Tomorrow’s projected cash index price is down another 33 cents to $88.43. The national direct five-day rolling average cash hog price quote today is $89.43. The noon report today showed pork cutout value down 44 cents to $95.55 amid losses in loins. Movement at midday was decent at 147.67 loads.
July lean hog futures are trading at a modest premium to the cash index, suggesting uncertainty over the near-term outlook but some potential near-term strength. July futures expire next Monday. However, the August contract is now trading at a discount to the July contract and at a slight discount to the cash hog index.
Fresh pork movement has remained relatively strong lately, implying retailer demand is staying firm following the Fourth-of-July holiday and could be a sign retailers will be featuring more pork.
Technical analysis: The lean hog futures bears have the overall near-term technical advantage. However, a price downtrend on the daily bar chart has stalled out and turned into choppy and sideways trading at lower levels. The next upside price objective for the hog bulls is to close August prices above solid chart resistance at $92.50. The next downside price objective for the bears is closing prices below solid technical support at $85.00. First resistance is seen at $90.00 and then at the July high of $91.175. First support is seen at $88.00 and then at $87.00.
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 fell $2.00 to $182.35 and settled near the midpoint of today’s range. August feeder cattle futures fell $3.45 to $255.725 and settled nearer session lows.
Fundamental analysis: Live cattle futures underwent heavy selling pressure for the second consecutive session, though closed well off session lows. Weaker wholesale prices likely played a role in live cattle weakness today. Choice cutout sunk $4.87 to $325.60, the lowest quote in two weeks, while Select dipped $1.69 to $303.03. The weakness in futures is likely tied to anticipated lower beef demand following the Fourth of July, often coined as the “summer doldrums.” Part of the weakness in wholesale prices today could be tied to packers offloading beef supplies. The weakness in prices and the uptick in movement, which totaled 71 loads at midsession, points to packers wanting to move beef despite any potential downtick in prices. That further cements traders’ view that the cash market is likely to cool off sooner than later, with cash cattle prices likely to lead the way lower. The steep discounts in cash prices are likely to limit some of the downside in futures, especially if cash cattle falls less than traders currently expect.
Feeder cattle futures have faced concurrent weakness with the fats market. The feeder index has stalled in recent days which has likely weighed on feeder futures, limiting the upside despite weakness seen in the corn market.
Technical analysis: August live cattle futures saw heavy selling again today though losses were pared by uptrend support stemming from the April low. August futures remain in an uptrend with bulls holding the technical advantage though weakness much below $182.50 support challenges their edge and would further point to a near-term top being in place. Additional support lies at $181.50, the 40-day moving average, then the psychological $180.00 mark. Bulls are seeking to overcome resistance at Monday’s low of $183.80 then the 10-day moving average at $184.40.
August feeder futures challenged uptrend line support today as well. Bulls are seeking to hold prices above support at $255.00, a break below which challenges the uptrend stemming from the April lows. Additional support lies at $254.35 then $252.85. Meanwhile, resistance comes in at $257.375 then the psychological $260.00 mark.
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.