Hogs
Price action: December lean hog futures closed 45 cents higher and near the session high at $78.275 despite trading lower early in the session.
Fundamental analysis: Lean hog futures scored fresh for-the-move highs as contra-seasonal strength persists in cash fundamentals. December futures broke above technical resistance that limited gains late last week as December futures closed above the $78.00 mark for the first time since April. The CME lean hog index is up 11 cents to $83.96 as of Oct. 17, ending a four-day streak of losses. The preliminary calculation puts the index up another 27 cents to $84.23. which would be the highest quote since Oct. 10. It is uncommon for the hog index to tick up in mid-October, which could lead to sustained strength in futures as the gains have been largely unexpected. Pork cutout has proven quite strong as well, climbing $1.75 to $98.34 at midsession, with loins, ribs and butts leading the way higher this morning. Continued strength in the cash market could be a sign that the market is realizing that USDA overestimated hog numbers. Pork cutout has trended higher over the past week, though with seasonal weakness looming, it is unsure how long cutout can continue to boast gains.
Technical analysis: December lean hog futures climbed to a six-month high today as bulls maintain the near-term technical advantage. Initial resistance comes in at $78.975, while additional strength finds resistance at the psychological $80.00 mark. Bulls are seeking to hold prices above $78.00, which acted as firm resistance late last week. Additional weakness would find support at the 10-day moving average at $77.05, then today’s low of $76.80.
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 fell 50 cents to $186.825, nearer the session low. November feeder cattle lost $1.00 to $246.60, nearer the daily low.
Fundamental analysis: The live and feeder cattle futures markets paused to start the trading week. Mild profit-taking pressure from the speculators after recent gains was featured. Losses were limited by solid cash cattle and beef market fundamentals. Last week’s average cash cattle trading price was up 40 cents at $187.61. We look for active cash cattle trade to occur late in the week.
Rising boxed beef prices continue to support better packer margins despite continued strength in the cash cattle market. That has allowed packers to raise their cash bids. The noon report today showed wholesale boxed beef prices rose again, with Choice grade up $1.42 at $322.07 and Select grade up $1.67 at $295.87. The rally in wholesale beef has packer margins strongly in the black despite straight weekly gains in average cash cattle price the past month and a half. Movement at midday was light at 40 loads. The Choice-Select spread is presently $26.20. The wide Choice/Select spread suggests a shortage of high-quality beef.
Technical analysis: The live and feeder cattle futures bulls still have the overall near-term technical advantage. However, six-week-old price uptrends on the daily bar charts are in some jeopardy. 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 Friday’s high of $187.675 and then at the October high of $188.55. First support is seen at $186.00 and then at $185.00. 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 Friday’s high of $248.275 and then at $250.00. First support is seen at last week’s low of $244.925 and then at $244.00.
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.