Hogs
Price action: Hog futures pulled back after surging to five-month highs Wednesday. The expiring October contract fell 50 cents to $84.175, while most-active December dropped 35 cents to $76.40.
Fundamental analysis: After struggling since late July, the cash hog market is exhibiting surprising strength here in early October. The CME index seemingly bottomed at $84.05 last week and has turned decisively higher for at least the moment. It rose 32 cents to $84.45 Tuesday, with Wednesday’s preliminary calculation putting it another 45 cents higher at $84.90. Pork cutout did dip $1.29 to $95.02 yesterday but edged up 17 cents to $95.19 at midsession today.
We believe this reflects the persistent strength exhibited by consumer demand since Independence Day, when grocers seemingly became much more active in featuring pork products (after keeping retail prices stubbornly high during spring). In fact, the recent cash and wholesale strength suggests they may have become even more aggressive with their pork features for “National Pork Month” during October. The other big shift was a significant slowdown in hog slaughter during the last two weeks of September. After regularly topping year-ago levels by 1%-3% through summer, the totals for the past two weeks fell 1.6% and 2.5%, respectively, from comparable 2023 levels. This was truly surprising since the Sept. 26 USDA Hogs & Pigs report implied early-fall totals would run 3%-5% over last year, with the difference amplifying recent futures gains. Of course, the expected surge in hog numbers may simply be taking longer to show up than expected. This weekend’s preliminary kill total, to be published after Friday’s close, could be extremely important to the short-term outlook.
Technical analysis: Bulls still own the short-term technical advantage in December hog futures. This partially reflects bears’ inability to force a drop below psychological support at $75.00 today, much less test strong support between the 10-day moving average near $74.72 and Wednesday’s low at $74.60. Expect solid backing from the 20-day moving average near $73.25 as well. Conversely, bulls couldn’t overcome initial resistance at yesterday’s high of $76.80. Still, a followthrough advance would have them looking to test a zone of resistance between the April 23 high of $78.975 and the April 2 high of $79.375.
What to do: Carry all production risk in the cash market for now.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You are hand-to-mouth on corn-for-feed and soymeal needs.
Cattle
Price action: December live cattle fell $1.30 to $186.40 and nearer the session low. November feeder cattle lost 42 1/2 cents to $248.125 and near mid-range. Both markets hit two-month highs early on today.
Fundamental analysis: The live and feeder cattle futures markets today saw some routine profit-taking by the speculators following recent good gains. Traders were awaiting any fresh news on cash cattle trading this week. It appears this week’s cash cattle average is going to fall somewhere between $186.00 and $187.00. USDA reported 968 head traded at $187.00 in Iowa-southern Minnesota Wednesday, with 260 head changing hands at $186.00 in Texas, with the larger Iowa trade pulling the average up to $186.79. Cutting margins in the red and ideas packers are well supplied after recent active purchases likely kept some packers tentative on their cash cattle bids this week.
Today’s noon report showed mixed wholesale boxed beef prices, with Choice declining 32 cents to $299.49, while Select rose 55 cents to $284.48. Movement at midday remained good at 84 loads. The Choice-Select spread is currently $15.01, in line with the 10-year average spread for this time of year.
Steer dressed weights rose to an all-time record high of 945 pounds per head in mid-September. However, market-ready feedlot numbers are tight and the industry is using the extra production per head to augment beef supplies for still-solid consumer demand at the meat counter that is likely to continue.
USDA this morning reported U.S. beef export sales of 22,500 MT for 2024, up sharply from a week ago and 68% above the four-week average.
Technical analysis: The live cattle futures bulls still have the firm overall near-term technical advantage amid a steep nearly four-week-old price uptrend in place on the daily bar chart. 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 $182.00. First resistance is seen at today’s high of $187.90 and then at $189.00. First support is seen at Wednesday’s low of $185.025 and then at $184.00.
The feeder cattle bulls have the overall near-term technical advantage. 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 $240.00. First resistance is seen at today’s high of $249.225 and then at $250.00. First support is seen at $246.00 and then at $245.00.
What to do: Carry all production risk in the cash market for now.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: You are hand-to-mouth on corn-for-feed and soymeal needs.