Hogs
Price action: October lean hog futures climbed $1.20 To $79.75 and settled near session highs.
Fundamental analysis: October lean hog futures surged on corrective buying, negating recent oversold conditions. October lean hogs closed lower for five consecutive sessions prior to today, leaving prices short-term oversold. Bulls will seek to build on today’s advance, but unless strength returns to the cash market, the rally is likely to be short lived. The CME lean hog index is down another 18 cents to $85.56 as of Sept. 9, a for-the-move low. The preliminary calculation puts the index down another dime to $85.46 tomorrow. While the index continues to decline, daily losses have gotten smaller over the past several days. Some modest strength in futures could persist as traders narrow discounts to the cash index, but a sustained bounce will be difficult without help from a short-term bounce in the index, which would most likely be spurred by improved pork demand. Grocers appear to be stocking up on pork for features in October (National Pork Month). Movement surpassed 400 loads on Tuesday at 434.32 loads, the highest total in quite some time. While cutout dropped, grocers scooping up large amounts of pork is a good sign. Cutout sunk another $1.52 to $93.28 at midsession, led lower by a $6.21 drop in loins, as all other cuts posted gains on the day.
Technical analysis: October lean hog futures saw a break from recent selling. Bulls continue to hold the near-term advantage as an uptrend from the July low persists on the daily bar chart. Bulls are seeking to reclaim resistance at $79.85, which is quickly backed by the psychological $80.00 mark. Further strength finds resistance at $81.45. Yesterday’s low of $78.20 marks initial support, which coincides with the 40-day moving average. Further selling finds support at $77.25 uptrend support.
What to do: Get current with feed advice. Carry all production risk in the cash market for now.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all corn-for-feed and soymeal needs covered in the cash market through August.
Cattle
Price action: Cattle and feeder futures rebounded Wednesday despite widespread short-term pessimism and wholesale price slippage. October live cattle futures rallied 62.5 cents to $176.95, while most-active October feeder futures surged $2.10 to $237.075.
Fundamental analysis: The cash market drop experienced over the past six weeks has developed a downward momentum of its own, which seemed to drag futures lower during a significant portion of Wednesday’s futures trading. There was virtually no cash trading Monday or Tuesday. The fact that the length of the recent cash drop has essentially doubled strings of consecutive cash losses seen during the third quarter of 2023, despite very similar feedlot conditions and arguably stronger consumer demand, suggests the drop is overdone.
The August CPI data released today indicated a 4.2% rise in retail beef prices from last year, but it marked a rise of just 0.3% from July. August steak prices rose just 0.2% from July and 1.2% from year-ago. We believe that comparative stability will spur persistently solid demand from consumers and continue supporting the cattle/beef complex. Bears can point to Choice beef prices dipping another 22 cents to $308.01 at noon today, but much larger declines in select beef cutout suggest feedlot marketings are becoming more current, with select beef supplies becoming comparatively more plentiful.
Having feeder futures rebound strongly despite grain and soy market firmness implies the emergence of underlying strength. Increasingly large discounts (below the feeder index, now at $242.99) built into fall and winter feeder futures also give them room to rally.
Technical analysis: Bears still own the short-term technical advantage in live cattle futures, but their inability to sustain midsession losses into the close weakened their hold. Nevertheless, expect stiff resistance between initial resistance at today’s high of $177.35 and the contract’s 10- and 20-day moving averages near $177.63 and $177.73, respectively. A close above those levels would open the door to a retest of the psychological $180.00 level, then the 40-day moving average near $180.63. Today’s low marked initial support at $175.50, which is likely backed quite stoutly by psychological support at $175.00. Expect added support near last Monday’s low of $173.775, with a followthrough drop likely having bears targeting $170.00.
Bears still enjoy the short-term technical advantage in October feeder futures, although today’s strong rebound also endangers their hold as well. Futures bounced strongly from support at the daily low of $233.775, with the sizeable advance establishing initial support around the intersection of its 10- and 20-day moving averages at $236.31 and $236.27. A short-term reversal that violates those levels would open the door to a test of the $230.00 level. Today’s high placed initial resistance at the daily high of $238.025, with backing from last week’s high of $238.80. Bulls would almost surely target the $240.00 level if they could top those levels.
What to do: Get current with feed advice. 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 have all corn-for-feed and soymeal needs covered in the cash market through August.