Hogs
Price action: Nearby December lean hog futures ended Thursday having slipped 92.5 cents to $81.20 Thursday, whereas the deferred contracts posted modest gains.
Fundamental analysis: The cash hog and wholesale pork markets sent mixed signals Thursday morning, which probably explains the December hog contract’s setback. The CME index continued its upward march, with the exchange confirming Tuesday’s quote at $90.24, up 45 cents. In addition, USDA data indicated Wednesday’s figure is likely to come in at $90.61, up another 37 cents. Again, the ongoing cash rise almost surely reflects the comparative shortage of hogs available to packers. The fact that last week’s average weight for Iowa-southern Minnesota hogs dipped to 275.8 pounds per head, down 0.2 pounds from the week prior, and 0.9 and 1.4 pounds below comparable year-ago and five-year average figures, respectively, confirmed the tightness of current supplies. That contrast’s to increases of over 3.0 pounds from year-ago and five-year average levels in early September.
Conversely, after having surged to $104.01 on Monday, pork cutout continued the subsequent slide, having fallen $1.29 to $100.86 at noon today. Bulls can point to the fact that cutout fell only that much when pork belly values had dived over $10.00 this morning, reflecting sustained strength in pork loin and butt values. Nevertheless, the wholesale weakness may prove a harbinger of the usual fourth-quarter decline in hog and pork values. December futures are currently priced about $9.00 below the index, which confirms the widespread pessimism about cash market prospects over the next six weeks. Ultimately, this highlights the real question about the short-term outlook: how far will the cash market decline during that span? We are not convinced it will fall as sharply as indicated by December futures.
Technical analysis: Bulls still hold the short-term technical advantage in December hog futures. However, initial resistance at today’s high of $81.95 is stoutly backed by the 10-day moving average near $82.33. A rebound back above that point would open the door to a retest of Monday’s high at $84.825 and the psychological $85.00 level. Today’s low of $81.00 likely marked the onset of support extending from yesterday’s low at $80.825, both of which are strongly supported by the psychologically important $80.00 level. A close below the latter point would have bears targeting the 40-day moving average near $77.42.
What to do: Get current with feed coverage. Carry all production risk in the cash market for now.
Hedgers: You have 50% of fourth-quarter production hedged in December $84.00 put options at $2.075 and 50% of first-quarter production hedged in February $84.00 puts at $3.35.
Feed needs: You have all of fourth quarter and 25% of first quarter 2025 soymeal needs in the cash market. You should also have all corn-for-feed needs covered in the cash market through November.
Cattle
Price action: December live cattle rose 42 1/2 cents to $185.825, near mid-range. November feeder cattle fell 5 cents to $247.65 and near mid-range.
Fundamental analysis: The live and feeder cattle futures markets saw consolidative trade today. The discounts futures contracts hold to the cash cattle market are limiting selling pressure in futures. Firmer corn futures prices this week may be slightly limiting buying interest in feeder cattle futures.
Traders are awaiting cash cattle trading to fully develop this week. No significant trade was seen Wednesday. It appears the industry is looking for more slippage in cash prices this week, after a slightly lower cash average last week. The noon report showed wholesale boxed beef prices down again, with Choice falling $2.89 to $312.70, while Select declined 26 cents to $282.94, taking the Choice/Select spread to $29.76. Movement at midday was decent at 75 loads.
USDA this morning reported U.S. beef export sales of 8,000 MT, a marketing-year low, for 2024. Net sales fell 43% from the previous week and 45% from the four-week average.
Technical analysis: The live and feeder cattle futures bulls still have the overall near-term technical advantage but have faded recently to begin to suggest market tops are in place. Price uptrends on the daily bar charts have been negated. The next upside price objective for the live cattle bulls is to close December futures above solid resistance at $188.00. The next downside technical objective for the bears is closing prices below solid technical support at $182.00. First resistance is seen at this week’s high of $186.60 and then at $188.00. First support is seen at last week’s low of $184.45 and then at $183.00. The next upside price objective for the feeder bulls is to close November futures prices above technical resistance at the October high of $251.25. The next downside price objective for the bears is to close prices below solid technical support at $240.00. First resistance is seen at this week’s high of $248.95 and then at $250.00. First support is seen at this week’s low of $245.50 and then at last week’s low of $243.65.
What to do: Get current with feed coverage. Carry all production risk in the cash market for now.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: You have all of fourth quarter and 25% of first quarter 2025 soymeal needs in the cash market. You should also have all corn-for-feed needs covered in the cash market through November.