Hogs
Price action: December lean hogs rose $2.20 to $82.825, near the daily high and hit at contract high.
Fundamental analysis: The lean hog futures market powered higher again today, with chart-based speculator buying featured amid bullish technicals. Cash hog market fundamentals are also solid. December futures continuing to reduce their discount held to the cash index shows hog traders are becoming more optimistic about the medium-term price prospects.
The latest CME lean hog index is up another 12 cents to $85.55 as of Oct. 25, the seventh straight daily gain. During that timeframe, the cash index has gained a total of $1.69. Wednesday’s projected lean hog index is up another 18 cents to $85.73. The cash hog index continues to rise despite late October being a historically weaker period. The national direct five-day rolling average cash hog price quote today is $74.79. The noon report today showed pork cutout value up 26 cents to $102.21 on gains in bellies. Cutout price gains despite declining product movement suggests retailer demand remains solid. Pork product movement at midday was decent at 164.86 loads.
Technical analysis: The lean hog futures bulls have the strong overall near-term technical advantage. A nine-week-old price uptrend is in place on the daily bar chart. However, this bull-market run is very mature and the market is now short-term overbought and due for at least a downside price correction very soon. The next upside price objective for the hog bulls is to close December prices above solid chart resistance at $85.00. The next downside price objective for the bears is closing prices below solid technical support at $77.50. First resistance is seen at today’s contract high of $83.00 and then at $84.00. First support is seen at today’s low of $81.25 and then at $80.00.
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 should also have all corn-for-feed and soymeal needs covered in the cash market through November.
Cattle
Price action: December live cattle futures sunk $1.325 to $187.95. November feeder cattle futures plunged $2.60 to $246.60.
Fundamental analysis: Live cattle futures closed lower today after making a fresh for-the-move high in early trade. December futures are trading at a modest discount to last week’s cash average. Traders are realizing that a dip in the cash market is likely to occur ahead of the December contract’s expiration, especially considering the recent seven-week gain in the weekly cash cattle average. Cash cattle trade has yet to initiate this week, and trade is expected to be light as packers have purchased a significant amount of cattle the past several weeks and fresh contracted supplies become available late in the week. Dipping wholesale beef prices likely played a role in today’s futures weakness as well as Choice cutout dipped 35 cents to $323.15 and Select dipped $1.82 to $290.36. While prices sunk, movement surged to 81 loads this morning, a sign of robust grocer demand under the market.
Feeder cattle futures have stalled in the past couple of weeks as the cash market has paused as well. The pause in feeder futures corresponded with the rally in corn futures as well. Feeder futures have tightly tracked the feeder index, which is most recently up 28 cents to $249.37. The feeder fundamental outlook continues to point to elevated prices, so any sustained selling is likely to be bought.
Technical analysis: December live cattle futures marked a fresh for-the-move high on the open today but underwent steady selling pressure throughout the remainder of the session. Bulls continue to own the near-term technical advantage and are seeking to overcome resistance at $188.00 before looking to overcome the for-the-move high close at $189.275. Support comes in at the 20-day moving average at $187.05 then the Oct. 17 close at $186.175.
Feeder cattle futures followed fats lower today, facing persistent selling pressure throughout the session. The technical outlook for feeders is less bullish than fats, though bulls do maintain the advantage. Bulls are looking to retake the 20-day moving average at $246.95, which is backed by yesterday’s close of $249.20, then the psychological $250.0 mark. Support lies at the 40-day moving average at $245.45 then $244.925.
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.