Livestock Analysis | June 15, 2023
Price action: Hog futures set back from early highs, with nearby July falling 85 cents to $91.925 and August sustaining a 62.5-cent rise to $90.30.
Fundamental analysis: The cash hog and wholesale pork markets showed less strength Thursday than earlier in the week, which likely explains the July futures reversal and the setbacks from early highs suffered by the August, October and December contracts. After surging 84 cents to $86.25 (for Tuesday) when officially published today, the preliminary CME hog index quote for Wednesday rose 62 cents to $86.87. Moreover, the upward momentum in pork cutout values seems in danger of ending, as indicated by the noon quote slipping one cent to $89.72.
We think it’s too soon to think about calling a top in the cash market, especially with July 4 still over two weeks away. We would also remind readers that the July 4 holiday arriving on Tuesday will likely put a major hole in hog slaughter and pork production that week, since packers are unlikely to operate all that aggressively on Monday and everyone gets Independence Day off. The ongoing rise in choice beef values pushed the noon quote up to $341.85, topping the June 2021 high of $340.55 and moving into third place all-time. That’s making pork look like an increasing bargain. We also suspect the very late start to the seasonal hog/pork advance will cause that rise to extend into mid-to-late summer.
Technical analysis: Bulls still hold the short-term technical advantage, especially with bears proving unable to force a close back below the psychological $90.00 level. That point marks initial support, with backing from yesterday’s low of $87.975 and the 40-day moving average near $85.97. Failure at the latter point would have bears targeting the $80.00 level once again. Today’s high likely represents initial resistance at $91.625, with a push above that level seemingly opening the door to a retest of the April high at $94.95. A close above that level would have bulls targeting $100.00.
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.
Price action: August live cattle rose 10 cents to $171.075 and nearer the session high. August feeder cattle fell $1.775 to $234.125. Feeder prices gapped lower on the daily bar chart and hit a three-week low but closed nearer the session high.
Fundamental analysis: The live cattle futures market remains stable at higher price levels amid still-bullish cash market fundamentals. Selling interest in futures remains limited by the big discounts futures hold to the cash cattle market. Feeder cattle futures today succumbed to some profit-taking pressure and to sharp gains seen in the corn futures market.
Packers are trying to get cattle bought a lot cheaper this week, but feedlots aren’t biting. Limited trade is seen at lower prices so far, though not enough for a true test. The Monday-Wednesday cash average came in at $187.56 on light trade of 2,855 head of steers. That’s lower than the week-ago figure at $190.05, but it’s up from the previous figure at $186.00 and down only $1.19 from last week’s average.
The noon beef report showed Choice grade cutout up another $2.79 to $341.85, while Select grade rose 81 cents to $3.10.07, further widening the Choice/Select spread to $31.78. Movement at midday was light at 36 loads. Today’s midsession quote for Choice cutout topped the first of the 2021 peaks at $340.55, though still well below the August top at $348.03.
USDA this morning reported net weekly U.S. beef sales of 12,800 MT for 2023, unchanged from the previous week but down 23% from the four-week average.
Technical analysis: The live and feeder cattle futures bulls still have the firm overall near-term technical advantage. Live cattle futures prices are in a five-week-old uptrend on the daily bar chart but just barely. 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 $173.00 and then at this week’s high of $174.40. First support is seen at today’s low of $169.65 and then at $168.00. 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 $228.00. First resistance is seen at $235.55 and then at $237.00. First support is seen at today’s low of $232.275 and then at $231.00.
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.
