Hogs
Price action: October live cattle futures climbed 27.5 cents to $82.05, settling nearer session highs.
Fundamental analysis: Lean hog futures closed modestly higher, reversing early morning weakness and closing near session highs. Today marks the third consecutive daily gain in October lean hog futures, though volume today was extremely light. Traders across asset classes reduced their risk ahead of the Federal Reserve’s interest rate decision, which featured a highly anticipated rate cut of 50-basis points, the upper end of expectations, lowering rates from the 23-year high of 5.25% to 5.50% which have been maintained since July 23. Relative strength in the CME lean hog index likely supported futures as well. The CME lean hog index fell another 16 cents to $84.22 as of Sept. 16, though tomorrow’s preliminary quote for the index is steady at $84.22. Some strength returning to the cash market has given credence to the recent rally in futures. October futures are likely to closely track the cash index in the coming days. Pork cutout is up another $1.08 to $96.08 at midsession, led higher by strong gains in loins and ribs. Movement remains quite strong at 181.85 loads, indicating robust pork demand which is underpinning both wholesale pork and the cash market.
Technical analysis: October lean hog futures closed higher for the third consecutive session as bulls continue to maintain the near-term technical advantage. Bulls next target is overcoming the Sept. 3 for-the-move high close of $82.525, which is reinforced by resistance at $83.375 then the psychological $85.00 mark. A resurgence of selling pressure would face support at $80.75, the 10-day moving average at $80.30, then the psychological $80.00 mark.
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: Most cattle futures rose modestly Wednesday, with the exception being the nearby October contract, which slipped 50 cents to $178.30. Most-active October feeder futures dropped 80 cents to $239.95.
Fundamental analysis: This week’s early cash market activity suggests fed cattle prices will rise again this week. The fact that last week’s average of $182.11 came in 93 cents above the week-prior almost surely played a significant role in Tuesday’s strong futures advance, as well as the firmness exhibited by deferred futures today. This week’s early cash activity, although minimal, also suggests another cash market rise. A few head traded at $183.48 in Iowa-southern Minnesota Monday. Some steers also traded there at $177.97 Tuesday, but those were likely low-quality animals, because yesterday saw a few more heifers trade at $183.00 in that region, as well.
Beef prices are slipping, as exemplified today’s midsession quote for Choice beef down 36 cents to $303.55. Select cutout slid 61 cents to $291.61. Conversely, the Choice-Select spread at $11.94 implies consumer demand for high-quality beef remains strong despite generally elevated prices and a comparative shortage of product. Discounted deferred futures imply diminished feedlot industry demand for replacement yearlings and persistently tight feedlot supplies. An industry survey for Friday’s USDA Cattle on Feed report has the average estimate for August feedlot placements at 99% of year-ago, while August marketings are expected at 96.6% of last year. Those numbers would put the September 1 feedlot population at 11.19 million head, up 0.9% over the comparable year-ago figure.
Feeder futures were mixed Wednesday despite their discounts to the feeder index, now at $243.44. That partially reflects recent grain market strength, as well as pessimism about the fall fed cattle outlook.
Technical analysis: Bears seemingly still own the short-term technical advantage in October live cattle futures. That would likely flip if bulls were to prove able to force a move above initial resistance at Tuesday’s high of $179.225, the 40-day moving average near $179.80 and the psychological $180.00 level. A breakout above the latter point would likely have them targeting the $185.00 level. Today’s low marked initial support at $178.20, with backing from the confluence of the contract’s 10- and 20-day moving averages around $177.35. A drop below that point would open the door to a retest of the $175.00 level.
Bulls seem close to flipping the short-term technical advantage in October feeder futures to their favor, with late trading essentially matching the 40-day moving average near $240.75 for the second straight day. The weak close favored bears. A bearish reversal would face solid support around Monday’s low of $238.525, with further backing from the contract’s 10- and 20-day moving averages around $237.00. A bullish breakout would have bulls quickly targeting the Aug. 15 high of $243.45, whereas a push above that point would open the door to a run toward the pivotal $250.00 level.
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.