Hogs
Price action: December lean hog futures plunged $1.85 to $75.80. October futures went off the board at $84.10, up 2.5 cents on the day.
Fundamental analysis: Deferred lean hog futures underwent heavy selling pressure today as technical resistance gripped hold of the market. December futures struggled and failed to break above $77.00 resistance over the course of the past couple of weeks, with weakness below that mark sparking today’s staunch selloff. Nearby October futures went off the board at noon today, rising a tick to $84.10. They will cash settle against the index quote for today, released on Wednesday. Traders anticipated a modestly weaker tone over that period, with the index being quoted at $84.29, down 18 cents, on Oct. 10. The preliminary calculation puts the index down another 13 cents to $84.16 for tomorrow’s quote. The index has been in a choppy range since mid-September, though traders anticipate seasonal weakness returning to the index over the course of the next month or so. Strength in the pork market did little to support futures today as pork cutout climbed $1.88 to $96.35, driven by strength in hams, loins and bellies. Movement has slowed from the September highs, coming in at 149.9 loads at midsession. That could be due to pork production slowing rather than a dip in retailer demand. Last week’s hog slaughter dipped below a year-ago and weights are climbing less than the seasonal norm. Both points to pork production under what USDA has implied, which could prove more bullish in the longer term, especially considering holiday demand right around the corner.
Technical analysis: December lean hog futures underwent heavy selling pressure, though losses can be chalked up to profit-taking as an uptrend persists on the daily bar chart. Bulls are seeking to hold prices above uptrend support at $75.60, which is reinforced by the 100-day moving average at $75.15, then the psychological $75.00 mark. Resistance comes in at $76.15, the 10-day moving average, then $77.00 on a reversal back higher.
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 35 cents to $187.925, nearer the session high. Prices Friday hit a 2.5-month high. November feeder cattle fell 22 1/2 cents to $249.575, nearer the session low and hit a 2.5-month high early on.
Fundamental analysis: The cattle futures markets continue to be supported by better cash market fundamentals. Last week’s average cash cattle trade was at $187.21, up 32 cents from the week prior. That marked the fifth straight week of higher average cash cattle prices. Today’s noon report showed Choice-grade boxed beef values up another $1.59 to $312.81, while Select rose $1.73 to $290.45, taking the Choice/Select spread to $22.36. Movement at midday was light at 32 loads. Boxed beef prices have gained recently despite record-high steer weights, suggesting still-solid near-term consumer demand for beef at the meat counter.
Modest profit taking by the speculators was featured in feeder cattle futures today. However, the recent sell off in the corn futures market is a positive for the feeder cattle futures market and limited selling pressure.
On a macro basis, recent upbeat U.S. economic data that includes a stronger U.S. jobs report in early October and tame U.S. inflation data last week, as well as the likely still-lower interest rates from the Federal Reserve in the coming months bode well for upbeat consumer confidence in the coming months. This scenario suggests stronger consumer demand for beef continuing into next year.
Technical analysis: The live cattle and feeder cattle futures bulls have the firm overall near-term technical advantage amid steep five-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 last week’s high of $188.55 and then at $190.075. First support is seen at today’s low of $187.15 and then at $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 today’s high of $251.25 and then at $253.00. First support is seen at $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.