Hogs
Price action: October lean hogs rose $1.85 to $81.775, nearer the session high and hit a two-week high.
Fundamental analysis: The lean hog futures market bulls are out of the gate strong so far this week, which suggests some more follow-through technical buying interest from the speculators will occur in the near term. October futures’ discount to the CME cash hog index also likely spurred some speculator buying interest in nearby futures today. Overall cash hog and pork fundamentals are still shaky, however. The latest CME lean hog index is down another 49 cents to $83.38 as of Sept. 13. Wednesday’s projected cash index price is $84.22, down 16 cents. The national direct five-day rolling average cash hog price quote today is $76.55. The noon report today showed pork cutout value fell 27 cents to $93.95. Movement at midday was 152.17 loads.
While consumer demand for pork is holding up well, seasonally increasing hog slaughter and pork production may limit price advances in cash and futures in the coming weeks. On the positive side, October is national pork month, which will find retailers likely featuring more pork cuts at the meat counter.
Technical analysis: The lean hog futures bulls have the overall near-term technical advantage. A five-week-old price uptrend is in place on the daily bar chart for October futures. The next upside price objective for the hog bulls is to close October prices above solid chart resistance at the September high of $83.375. The next downside price objective for the bears is closing prices below solid technical support at $75.00. First resistance is seen at today’s high of $82.075 and then at $83.375. First support is seen at today’s low of $80.20 and then at this week’s low of $78.60.
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: October live cattle futures surged $1.575 higher to $178.80, closing near mid-range. October feeder cattle futures rallied $1.75 to $240.75.
Fundamental analysis: Live cattle futures surged today, supported by continued strength in the cash market. Cash cattle trade got an unexpected early start in the northern market, with 986 head trading hands in Iowa at $183.48. That is up 66 cents from last week’s average for the area and $1.88 above the average from two weeks ago for the area. If gains are sustained in the cash market through the end of the week, it would mark the second consecutive week of gains for the area, while futures have been relatively flat over the same period. Cash cattle trade is generally pushed towards the end of the week when there is a Cattle on Feed Report such as this week, but early trade could persuade packers to raise bids in an attempt to secure cattle ahead of the report. Wholesale beef prices were mixed this morning with Choice cutout sinking 89 cents at midsession to $303.68 and Select firming 35 cents to $292.49. Movement was strong at 106 loads, showing robust grocer demand for beef.
Feeder cattle futures showed robust strength today as well. Price action in futures have been closely correlated with the feeder cattle index, which has been rangebound for a month now. That will likely lead to continued choppy price action in futures until the index begins to trend one way or the other. The most recent reading for the index is down 64 cents to $242.68, a modest discount to September futures and a mild premium to October prices.
Technical analysis: October live cattle futures surged higher today, marking the highest close since Sept. 4. Bulls broke out of a downtrend stemming from the mid-August high and seem to have put a near term bottom in place. Resistance at $179.25, the 40-day moving average, limited gains today. Strength above that mark would have bulls targeting the psychological $180.00 mark, then the 100-day moving average at $180.60. Bulls reclaimed the 20-day moving average as support, which currently lies at $178.05. Further selling finds support at $176.875, yesterday’s low.
October feeder cattle futures posted gains today as well, but the technical outlook is not as bullish as fats. Prices continue to trade sideways on the daily chart. The 40-day moving average, currently at $241.50, marks initial resistance, with backing from the Aug. 15 high of $243.45. Support lies at yesterday’s low of $238.525, which is quickly reinforced by the 10-day and 20-day moving averages at $238.10. Further selling likely targets support at $234.00.
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.