Livestock Analysis | June 8, 2023

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: Nearby June lean hog futures ended Thursday having dipped 2.5 cents to $87.675, with four trading days until expiration at noon on June 14. The August contract fell 67.5 cents to $82.425.

Fundamental analysis: Pessimism about the summer hog outlook remains substantial, as evidenced by today’s futures weakness in the face of sustained cash and wholesale strength. Tuesday’s official quote for the CME hog index matched the preliminary figure at $83.04, up $1.18. Wednesday’s preliminary figure came in another 76 cents higher at $83.80. And after having stalled the last couple days, pork cutout jumped $2.32 to $87.57 at midsession today. The market is clearly struggling to sustain the usual late spring-early summer advance, and the summer contracts are offering little hope for gains beyond the implied June high. That is, July and August both ended the day at discounts to June futures once again.

We still suspect much depends upon grocer industry actions in the coming weeks. If grocers continue actively featuring beef and maintaining relatively high retail pork prices (versus those of the past two years) after Independence Day, the upside for hog and pork prices may be quite limited. However, if soaring wholesale beef prices persuade them to switch their features to pork, the hog and pork markets could prove surprisingly strong this summer.

Technical analysis: Bears still seem to hold the short-term technical advantage in August hog futures, especially after bulls proved unable to seriously challenge resistance at the contract’s 40-day moving average near $86.30 so far this week. Look for initial resistance at the matching Monday-Tuesday highs at $84.85, with a breakout above the 40-day moving average likely having bulls targeting the psychological $90.00 level. The 20-day moving average near $82.25 is acting as initial support, with today’s low marking secondary support at $81.30. Additional support at the 10-day moving average near $80.55 is backed by the psychological $80.00 level.

What to do: Get current with advised feed coverage. Be prepared to extend coverage when the markets signal lows are in place.

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 mid-June.

 

 

Cattle

Price action: August live cattle fell 95 cents to $172.25 and near the session low. August feeder cattle dropped 45 cents to $238.65 today and near the daily low.

Fundamental analysis: Live and feeder cattle futures prices early Wednesday morning hit contract highs, with cattle futures scoring a record high. However, since then prices have backed off sharply to suggest the bulls have finally become exhausted. Cash market fundamentals remain solid, however. Cash cattle trading so far this week is averaging around $190. However, that price is likely to come down a bit once Texas trades, as it has the lowest prices in the five-state area. Still, this week’s cash cattle trade is sharply higher again and at a new record high--well above where front-month live cattle futures are trading. The noon beef report showed a $2.55 rise in Choice grade to $327.74, and a $2.15 increase in Select grade to $303.71, taking the Choice/Select spread to $24.03. Movement at midday was decent at 63 loads.

With still-tight market-ready supplies of cattle heading into the peak grilling season, with Father’s Day and the Independence Day holiday on the horizon, look for the cash cattle market fundamentals to remain solid for the near term. Consumer demand should remain elevated as retail beef prices are still below the highs of the past two years.

USDA’s weekly export sales report showed U.S. beef sales of 12,800 MT for 2023, down 29% from the previous week and 27% below the four-week average.

Technical analysis: The live and feeder cattle futures bulls still have the firm overall near-term technical advantage, but appear to be tired now. Prices are in steep uptrends on the daily bar charts. Live cattle bulls' next upside price objective is to close August futures prices above solid resistance at this week’s record high of $178.10, basis August futures. The next downside technical objective for the bears is closing prices below solid technical support at $167.50. First resistance is seen at today’s high of $174.15 and then at $176.00. First support is seen at today’s low of $171.90 and then at $171.00. In August feeder cattle, Wednesday’s price action saw a bearish “key reversal” down on the daily bar chart, which is one clue that a market top is in place. The bulls still have the solid overall near-term technical advantage. The next upside price objective for the feeder bulls is to close August futures prices above technical resistance at the contract high of $245.175. The next downside price objective for the bears is to close prices below solid technical support at $233.00. First resistance is seen at today’s high of $240.825 and then at $242.00. First support is seen at today’s low of $238.10 and then at $237.00.

What to do: Get current with advised feed coverage. Be prepared to extend coverage when the markets signal lows are in place.

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 mid-June.

 

 

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