Livestock Analysis | June 12, 2023
Price action: August lean hog futures led the complex higher today, rising $3.425 to $87.375.
Fundamental analysis: Lean hog futures saw sustained buying today after consolidating for most of last week. August futures reached the highest level since May 17 as futures piggyback the seasonal rally in the cash index. Thursday’s quote was confirmed at 48 cents higher to $84.28, while Friday’s preliminary quote is 45 cents higher to $84.73. Cash cattle making all-time highs has helped carry hogs higher, but weaker-than-average historical gains continue to plague prices which will generally rise at a more rapid rate than has been the norm thus far this year.
Pork cutout fell 35 cents at the midsession to $88.04 on 159.05 loads. While wholesale prices fell, prices maintained most of Friday’s $2.71 gain. Wholesale prices are nearing the highest levels since December, further bolstering bulls’ strength. Hog traders are looking for continued wholesale strength which would indicate a potential switch from beef to pork for grocer’s grilling specials in the upcoming holidays.
Expiring June futures fell 70 cents on the session to $87.175, still a healthy premium to the cash index. June futures will go off the board at noon on Wednesday and will be cash settled against Friday’s cash index quote.
Technical analysis: August futures surged above the 40-day moving average today. Bulls are in control of the technical advantage as prices have methodically marched higher over the last two weeks. Bulls encountered resistance at the May 16 close of $87.875, which will remain resistance. Further resistance can be expected at the April low of $88.95. Bulls want to defend initial support at the 40-day moving average at $85.9, backed by the June 6 high at $84.85.
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 futures rose $1.35 to $173.20. August feeder cattle gained 5 cents to $239.05. Prices closed nearer their session highs.
Fundamental analysis: The live and feeder cattle futures markets are being powered by solid cash market fundamentals that see the cash cattle market trading at record highs, with no strong, early signs of the market topping out. Last week’s average cash cattle trade came in at $188.65 up $6.72, which is a new record high. We look for cash cattle trade later this week to again be firmer. Feedlots have the upper hand in cash negotiations and packers appear to be in scramble mode. Live cattle futures prices are still well under cash market, suggesting there may be more upside potential in futures, but also suggesting futures traders bulls are getting more cautious.
The noon report today showed wholesale Choice grade beef cutout value up $3.66 at $336.59 and Select grade up $3.81 at $309.52. Movement at midday was light at 29 loads. The Choice-Select spread is presently at $27.07.
There is a history of cattle/beef complex price weakness during summer months. In addition, after running 20 pounds under year-ago levels as recently as early April, the latest reading for steer dressed weights (as of the week ended May 26) came in one pound over year-ago at 883 pounds per head. That suggests supplies of market-ready cattle may not be quite so tight as seen in past weeks.
Technical analysis: The live and feeder cattle futures bulls have the solid overall near-term technical advantage. Prices are uptrends on the daily bar charts. Live cattle bulls' next upside price objective is to close August futures prices above solid resistance at the contract and record high of $178.10, basis nearby futures. The next downside technical objective for the bears is closing prices below solid technical support at $167.50. First resistance is seen at $174.00 and then at $175.00. First support is seen at $172.00 and then at last week’s low of $170.95. 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 $230.00. First resistance is seen at Friday’s high of $240.90 and then at $242.00. First support is seen at last week’s low of $236.825 and then at $235.00.
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.
