Hogs
Price action: Hog futures turned higher after testing early support. Expiring October futures gained 10 cents to close at $84.025, while most-active December surged $1.375 to $76.95.
Fundamental analysis: The hog and pork complex continues following its sometime pattern of September and early October strength. As has been the case since early summer, the cash market gains haven’t been all that impressive, but downside moves have also been limited. The CME confirmed today that Tuesday’s quote for the lean hog index climbed 25 cents to $84.47. However, ideas that it would continue climbing were largely denied, since the latest USDA data implies Wednesday’s quote will prove unchanged at $84.47 when published tomorrow. Pork cutout also remained firm, having risen 39 cents to $95.20 yesterday, then slipping back to $94.85 at midsession today.
We still think pork demand remains strong, since September pork prices rose just 1.0% and 1.5% from comparable month- and year-ago levels. Moreover, pork chop and ham prices posted monthly declines (of 1.7% and 2.0%, respectively), while the 2.5% monthly rise in pork belly values still left the September figure 1.8% below September 2023. Another factor likely supporting the market is surprisingly low hog slaughter. The September 26 USDA Hogs & Pigs report implied hog supplies would run 5% over year-ago levels during September and early October, then average about 3.5% over last year during the balance of October and November. Instead, they fell a bit short of expectations early last month, then actually fell below year-ago levels later in the month. Last week’s preliminary figure rose just 0.44% annually. Pork packers are making money, so it’s highly unlikely they’re intentionally slowing operations. And December futures certainly aren’t encouraging producers to hold back hogs. The implication of surprisingly tight supplies could translate into considerable support for cash prices in the days and weeks ahead.
Technical Analysis: Today’s strong advance strengthened the short-term technical advantage held by bulls in December hog futures. Bears proved unable to penetrate initial support at the 10-day moving average near $75.70 this morning, much less challenge psychological support at $75.00. Expect added support at the 20-day moving average near $74.75, whereas a drop below those levels would have bears targeting the 40-day moving average near $72.80. Today’s high of $77.275 confirmed recent resistance in that area, with Tuesday’s high marking the upper edge of that resistance at $77.475. A bullish breakout would open the door to a test of the psychological $80.00 level.
What to do: Get current with feed coverage. Carry all production risk in the cash market for now.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have all soymeal needs covered in the cash market through November. You have all corn-for-feed needs covered in the cash market through October.
Cattle
Price action: December live cattle rose $1.05 to $188.275, nearer the session high and hit a 2.5-month high. November feeder cattle rose $1.275 to $249.95 and near the session high.
Fundamental analysis: Technical buying from the chart-based speculators was featured in the cattle futures markets today, amid bullish charts that show both markets in solid price uptrends. An upbeat consumer price index report this morning that showed tame U.S. inflation, as well as major stock indexes hitting record highs this week, bode well for better consumer confidence that should keep consumer demand for beef solid.
Cash trading broke loose at $187.00 in the north on Wednesday. USDA reported 1,068 head traded at $187.00 in Nebraska, with 5,502 averaging $186.98 in Iowa-southern Minnesota. There were steady cash cattle bids in the southern Plains this morning but no active trade yet. It’s likely southern cattle will trade around $186.00.
Choice and Select cutout values continue to firm, which have helped packer margins, though they remain in the red. Today’s noon report showed wholesales boxed beef values up again, with Choice-grade rising $1.44 to $309.62, while Select gained $1.80 to $290.43, taking the Choice/Select spread to $19.19. Movement at midday was 71 loads. Fresh beef movement has been solid recently, indicating good grocer demand.
USDA this morning reported U.S. beef export sales of 13,700 MT for 2024, down 39% from the previous week and 8% from the four-week average.
Technical Analysis: The live and feeder cattle futures bulls have the firm overall near-term technical advantage amid steep four-week-old price uptrends in place on the daily bar charts. The next upside price objective for the live cattle bulls is to close December futures above solid resistance at the July high of $190.075. The next downside technical objective for the bears is closing prices below solid technical support at $183.00. First resistance is seen at $189.475 and then at $190.075. First support is seen at $187.00 and then at today’s low of $186.40. The next upside price objective for the feeder bulls is to close November futures prices above technical resistance at $255.00. The next downside price objective for the bears is to close prices below solid technical support at $242.00. First resistance is seen at this week’s high of $250.80 and then at $252.00. First support is seen at today’s low of $247.60 and then at $246.00.
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 soymeal needs covered in the cash market through November. You have all corn-for-feed needs covered in the cash market through October.