Hogs
Price action: Hog futures turned lower Thursday, with nearby October falling 45 cents to $82.025.
Fundamental analysis: The recent lack of wholesale strength may be undercutting the cash and futures markets for hogs. Despite the general tendency for cash hog and pork prices to drop during late summer and fall, it’s actually rather common for pork cutout to rise rather significantly from around Labor Day into early-to-mid-October. But that hasn’t been the case lately. Instead pork cutout began September right around $100.00/cwt., worked lower into mid-September and has stabilized around $95.00 lately. It ended Wednesday having dipped to $94.10, then rose 30 cents to $94.40 at midsession.
The lack of wholesale strength hasn’t encouraged packers to pay up for hogs on the cash market, which in turn has translated into general stability for the CME lean hog index. This morning the exchange confirmed Tuesday’s quote for the index at $84.05, down 16 cents from Monday. The latest USDA data indicate it will bounce two cents to $84.07 when officially published (for Wednesday) tomorrow morning. Again, we suspect the lack of wholesale strength undercut the futures market today.
On the other hand, the drop may simply have reflected long liquidation on the part of traders evening up positions ahead of this afternoon’s quarterly USDA Hogs & Pigs report set for publication at 2:00 pm. Pre-report surveys indicate analysts and traders expected the report to show modest increases in hog supplies this fall and winter. See Evening Report for results and commentary.
Technical analysis: Today’s futures action damaged the short-term technical advantage in October hog futures held by bullish traders somewhat. The midsession drop to $81.275 established support at that level, although it’s below initial support at the 10-day moving average near $81.55. Look for added support at the 20-day moving average near $81.01, with a breakdown below that point opening the door to a test of psychological support at $80.00, then the 40-day moving average near $78.91. Initial resistance persists around today’s high of $82.525, with backing from Tuesday’s high at $83.05. A breakout above that point would face additional resistance at the Sept. 4 high of $83.375, then at the psychologically important $85.00 level.
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: Most-active December live cattle rose 50 cents to $184.825, with the expiring October contract surging $1.05 to $184.10. November feeder cattle rose 92 1/2 cents to $244.975. Both markets closed near the session highs and hit seven-week highs.
Fundamental analysis: Some chart-based buying from the speculators was featured today amid bullish near-term technicals for both live and feeder cattle futures markets. Concerns about cash cattle and beef market fundamentals spurred active selling early in the day, but the late surge reflected sustained hopes for another cash market advance this week. Cash cattle trading so far this week has yet to fully develop, but light Wednesday trading around $185.50 likely encouraged bulls We expect another modest cash market gain, up from last week’s average of $184.01. Today’s noon report showed wholesale boxed beef prices lower, with Choice grade down $1.53 to $296.64 and Select grade 35 cents down at $282.93. That’s the lowest Choice price since May. Movement stayed strong at 83 loads at midday, suggesting still-strong retailer demand for beef. The Choice-Select spread is presently $13.71.
The latest weekly U.S. beef export sales of 10,100 MT for 2024 were down 35 percent from the previous week and down 34 percent from the prior 4-week average. Increases were primarily for China (2,100 MT) and Japan (1,700 MT). USDA this afternoon will detail frozen meat stocks at the end of August. The five-year average is a 5.1-million-lb. increase in beef stocks. The data will give a read on consumer demand strength.
Technical analysis: The live and feeder cattle futures bulls have the overall near-term technical advantage amid steep price uptrends in place on the daily bar charts. The next upside price objective for the live cattle bulls is to close December futures above solid resistance at $187.50. The next downside technical objective for the bears is closing prices below solid technical support at $180.00. First resistance is seen at today’s high of $185.125 and then at $186.00. First support is seen at today’s low of $183.00 and then at $182.00. The next upside price objective for the feeder bulls is to close November futures prices above technical resistance at $250.00. The next downside price objective for the bears is to close prices below solid technical support at $237.50. First resistance is seen at $246.00 and then at $247.00. First support is seen at $243.00 and then at today’s low of $241.65.
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.