Hogs
Advice: We advise hog producers to hedge 50% of fourth-quarter production in December $84.00 put options and 50% of first-quarter production in February $84.00 puts. Our fills were $2.075 for the December puts and $3.35 for the February puts.
Price action: Hog futures posted a mixed performance Thursday, with nearby December futures falling 57.5 cents to $83.80.
Fundamental analysis: The cash hog and wholesale pork markets continued performing remarkably well at midweek. As expected, the CME officially stated Tuesday’s quote for the hog index $1.05 higher at $86.78. As noted yesterday, those represented the largest daily gain since April and the highest quote for the index since August. But those achievements look set to be crushed when the index is published tomorrow, since USDA data indicate it will jump another $1.15 to $87.93. Moreover, after ending Wednesday at $101.61, pork cutout rose another 70 cents to $102.31 at noon today despite a drop of about $2.50 in pork belly values. A big jump in picnic values, as well as significant loin, butt and rib gains powered the advance.
Ultimately, we continue thinking the surprisingly “small” hog numbers being processed these days are playing a major role in this advance. The weekly slaughter totals are quite large by historical standards, especially with fall processing of the big spring pig crop underway. But the fact that weekly kills have fallen short of year-ago levels in 5 of the past 6 weeks despite USDA projections for 3.5% to 5.0% annual gains this fall remains a powerful factor. We think the wholesale strength is also pointing to sustained consumer demand at high levels. We don’t know how far or how long the ongoing rally will carry prices, but the historical tendency for late-year weakness is well documented. Thus, we made the hedge suggestions detailed above.
Technical analysis: Bulls clearly own the short-term technical advantage in December hog futures. Today’s high marked initial resistance at $84.675 We can probably expect tentative resistance at the expired October contract’s Oct. 2 high of $84.75 and at the psychological $85.00 level. A breakout above those points would have bulls targeting $90.00. Today’s low indicates initial support at $83.65, with backing from the $83.00 level marking Wednesday’s low and Tuesday’s high. A drop below that point would open the door to a test of the 10-day moving average near $80.56 and the psychological $80.00 level.
What to do: Get current with feed coverage. Carry all production risk in the cash market for now.
Hedgers: NEW ADVICE -- Hedge 50% of fourth-quarter production in December $84.00 put options and 50% of first-quarter production in February $84.00 puts. Our fills were $2.075 for the December puts and $3.35 for the February puts.
Feed needs: You have all of fourth quarter and 25% of first quarter 2025 soymeal needs in the cash market. You should also have all corn-for-feed needs covered in the cash market through November.
Cattle
Price action: December cattle futures fell 12.5 cents to $186.30, while November feeders dropped 12.5 cents to $245.375. The October live cattle and feeder cattle contracts climbed $4.60 to $193.00 and $1.025 to $251.975, respectively, at their noon CDT expirations.
Fundamental analysis: Nearby cattle futures spent the session carving a narrow range, as technical support and near-term oversold conditions led traders to pause following strong selling efforts over the past two sessions. Some support likely also stemmed from mostly steady cash cattle trade across the Plains yesterday, with the average coming in at $189.94. With feedlots seemingly on a mission to seek higher prices implies cash prices will remain steady-firm this week. The strong October contract expirations likely encouraged underlying support.
Also curbing buyer interest was a further weakening of wholesale values, with the noon report showing Choice down $1.58 to $317.86 while Select slipped $1.28 to $288.04. Movement was reported at 91 loads.
Conversely, the CME feeder index rose 57 cents to $250.06, which likely limited losses in discounted feeder futures.
USDA released its weekly Export Sales Report first thing this morning, which showed net beef sales of 13,900 MT during the week ended Oct. 24. Net sales declined 17% from the previous week and from the four-week average, while exports totaled 15,700 MT.
Technical analysis: December cattle futures found support at Wednesday’s low of $185.475, which is backed by $185.29 as well as the 40- and 200-day moving averages, each trading around $184.53. Conversely, the 20- and 10-day moving averages of $187.54 and $187.85 curbed buying efforts, though a breach of the area will likely find bulls working above the recent high of $189.80, with resistance then serving at $190.19. A move below the initial support will face additional support at $182.84, then at psychological support at $180.00.
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 of fourth quarter and 25% of first quarter 2025 soymeal needs in the cash market. You should also have all corn-for-feed needs covered in the cash market through November.