Hogs
Price action: December lean hog futures climbed 95 cents to $80.625 and settled near session high.
Fundamental analysis: December lean hogs scored a contract high today as futures continue to be supported by contra-seasonal strength in the cash market. Lean hog futures continue to march higher in an impressive show of strength, supported today by strong wholesale pork prices. After rising over $8.00 on Friday, bellies continued another $4.09 higher today, leading cutout as a whole $4.05 higher to $102.99, which would be the highest quote since Aug. 5 if gains are sustained this afternoon. All cuts except ribs were higher this morning. Movement at midsession totaled 137.92 loads and has slowed the past few days, but prices have not yet reflected a slowdown in demand. Traders will keep a close eye on the wholesale market, as cutout has been leading the cash market higher the past few weeks. The CME lean hog index is up another 22 cents as of $85.43 as of Oct. 24 and the preliminary calculation puts the index another 12 cents higher to $85.55 tomorrow. December futures continue to shrink the discount held to the index as traders are becoming more optimistic about the medium-term outlook for hogs.
Technical analysis: December lean hog futures scored a fresh contract high and closed near session highs as bulls maintain full control of the near-term technical advantage. Initial resistance stems from today’s high of $80.825, which is reinforced by resistance at $82.00. Bulls are seeking to keep prices above support at $80.225, which is reinforced by the 10-day moving average at $78.75.
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 should also have all corn-for-feed and soymeal needs covered in the cash market through November.
Cattle
Price action: December live cattle rose 12 1/2 cents to $189.275, near the session high and closed at the highest closing level since last March. November feeder cattle gained 62 1/2 cents to $249.20 and nearer the daily high.
Fundamental analysis: Bullish technicals and cash cattle market fundamentals continue to drive the cattle futures prices north. Feeder cattle futures are also seeing better buying interest amid the recent sell off in corn futures prices.
Last week’s cash cattle trading average was up $2.44 at $190.05, the seventh straight weekly gain and the highest average level since early August. We look for cash cattle trade later this week to come in at least steady as beef packer margins remain solidly in the black. Today’s noon report showed wholesale boxed beef prices mixed, with Choice grade up $2.37 at $324.61 and Select grade down 66 cents at $294.42. The Choice-Select spread widened out to $30.19, implying still-tight supplies of market-ready cattle in the feedlots. Movement at midday was modest at 44 loads.
USDA last Friday afternoon estimated there were 11.600 million head of cattle in large feedlots (1,000-plus head) as of Oct. 1, virtually unchanged from last year. Placements were down 1.9%, while marketings rose 2.0% from year-ago levels in September. The feedlot inventory and placements numbers were just a little higher than the average pre-report trade guesses, but the report was overall neutral. Meantime, USDA’s Cold Storage Report showed beef stocks totaled 413.8 million lbs. at the end of September, up 25.2 million lbs. The five-year average was a 15.1-million-lb. increase for the month. Beef inventories declined 7.1 million lbs. (1.7%) from year-ago and were 49.9 million lbs. (10.8%) below the five-year average.
Technical analysis: The live and feeder cattle futures bulls have the firm overall near-term technical advantage. Prices are in seven-week-old price uptrends 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 $185.20. First resistance is seen at last week’s high of $189.50 and then at $190.075. First support is seen at $187.60 and then at last week’s low of $186.525.
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 $244.00. First resistance is seen at last week’s high of $249.40 and then at $250.00. First support is seen at $247.00 and then at last week’s low of $246.10.
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 should also have all corn-for-feed and soymeal needs covered in the cash market through November.