Hogs
Price action: October lean hogs rallied $1.25 to $83.50, marking the highest close since May 22.
Fundamental analysis: Nearby lean hog futures extended gains amid strong technical buying outside of the recent consolidation range to a more than four-month high. Such a move indicates traders expect cash trade, which has been on the decline, to extend higher in the near term. As of Sept. 27, the CME lean hog index was down 2 cents to $84.01, with today’s rally narrowing the futures’ discount to the cash index from $1.00-plus to around 80 cents. Preliminary figures verify such sentiments, with an expected 12-cent rise in the cash index to $84.13. Moreover, today marks the beginning of national pork month, which typically finds grocers featuring pork cuts more at the meat counter.
At noon, the pork cutout value showed a $1.51 jump to $97.35, led by gains in primal picnics, hams, bellies and butts, which offset weakness in ribs and loins. Movement at midday was strong at 193. 3 loads.
Technical analysis: October lean hogs broke out of the recent trading range, hemmed by resistance at $92.93 and supported by the 10-day moving average, with a move to the highest intraday level since May 22. Moreover, a close was held above recent initial resistance as well as $83.37. An extension higher will now face initial resistance at today’s high of $83.775, which is backed by $84.625. Conversely, initial support will stand at today’s failed resistance levels, then at the 10-day moving average, currently trading at $82.38, then at $81.82 and the 200-day moving average of $81.48.
What to do: Carry all production risk in the cash market for now.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You are hand-to-mouth on corn-for-feed and soymeal needs.
Cattle
Price action: October live cattle rose 70 cents to $184.475, a more-than-one-month high close, while November feeders fell 22.5 cents to $244.675.
Fundamental analysis: Cattle futures extended Monday’s gains as firming cash fundamentals continued to prop up the prices. However, packers purchased a large amount of cattle again last week and have fresh contracted supplies available with the flip of the calendar. Cash sources now expect cash trade to be less aggressive amid packers being better positioned on near-term slaughter needs combined with sliding margins, though feedlots have little incentive to move cattle at lower prices. As such, a standoff in cash trade could extend into late week.
Wholesale trade continued to firm this morning, with Choice rising $2.10 to $300.18 and select up 19 cents to $284.72, widening the Choice/Select spread to $15.46. At midday, movement totaled 74 loads. Seasonally, boxed beef prices forge a low in September and then rally into the end of the year.
The extended rally in corn futures was seemingly disregarded early on by feeders today amid solid gains but faded from the daily high as the session progressed.
Technical analysis: October live cattle ended the session above resistance at $184.325, with bulls continuing to prove their dominance. An extension higher will now face initial resistance at $184.875, then at $185.35, while initial support will serve at today’s failed resistance level. A move below the area, however, will face additional support at $183.30, which is backed by the 10-, 100- and 200-day moving averages, currently trading at $182.635, $181.685 and $181.020.
What to do: Carry all production risk in the cash market for now.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: You are hand-to-mouth on corn-for-feed and soymeal needs.