Hogs
Price action: December lean hogs fell 57 1/2 cents to $75.225, near the session low.
Fundamental analysis: The lean hog futures market today saw follow-through selling after Monday’s solid losses. This week’s price pressure has come mostly from speculators taking profits after recent gains that pushed prices to a five-month high last Friday. Solid losses in cattle futures markets today also limited buying interest in hogs.
Cash hog market fundamentals are also deteriorating a bit. The latest CME lean hog index is down 13 cents to $84.16 as of Oct. 11. The preliminary calculation puts the index down another 8 cents to $84.08 tomorrow. Today’s national direct five-day rolling average cash hog price quote is $75.52. December lean hog futures settled today at a nearly $9.00 discount to today’s cash quote, suggesting traders sense the cash index will drop around $1.00 per week through mid-December. The noon report today showed pork cutout value fell 8 cents to $94.89, led by losses in picnics. Movement at midday was good, however, at 250.99 loads.
Technical analysis: The lean hog futures bulls still have the overall near-term technical advantage. A two-month-old price uptrend is in place on the daily bar chart. The next upside price objective for the hog bulls is to close December prices above solid chart resistance at the April high of $79.60. The next downside price objective for the bears is closing prices below solid technical support at $72.50. First resistance is seen at $77.00 and then at $78.00. First support is seen at $75.00 and then at $74.00.
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 futures sunk $1.40 to $186.525 today. November feeder cattle futures plunged $3.10 to $246.475.
Fundamental analysis: Live cattle and feeder cattle futures both succumbed to selling pressure today, coinciding with the overall risk-off tone seen in the marketplace today. Traders are anticipating a downtick in the cash cattle market, which is unsurprising given the hefty purchases seen in the last few weeks, most recently evidenced by last week’s purchases being the most since June. Packers likely have the majority of their short-terms needs met and a dip in the cash market seems likely. On the other hand, packer margins have recently climbed back into the black as wholesale beef gains have overshadowed the rally seen in cash cattle. Choice cutout continues to march higher, rising $3.04 to $316.36 at midsession. Select was up $2.68 to $291.78. The Choice/Select spread has risen to $24.58, showcasing the robust demand of high-quality beef.
Feeder cattle futures underwent heavy selling today as well despite concurrent losses in the corn and meal markets. The continued strength seen in the feeder cattle index draws question to if recent futures weakness can persist, as the index is most recently up 56 cents to $250.61 and over $3.00 above nearby futures.
Technical analysis: Live cattle and feeder cattle futures underwent sharp selling pressure today though most recent selling efforts can be chalked up to profit-taking. Bulls continue to own the near-term technical advantage in both. Bulls managed to hold prices above the 20-day moving average in December live cattle futures today, marking that as initial support at $185.35. Additional selling quickly finds support at the psychological $185.00 mark. Resistance stems from the 10-day moving average at $186.85 then the for-the-move high close at $188.275.
November feeder cattle futures were supported by the 20-day moving average as well, which lies at $245.90. That level marks initial support and is backed by the psychological $245.00 mark. Resistance comes in at $248.00 then the for-the-move high close at $250.30.
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.