Livestock Analysis | July 17, 2023

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: August lean hogs closed $1.425 lower at $94.775, nearer the session low. Expiring July futures rallied 37.5 cents to $102.35 before trading ceased at noon today.

Fundamental analysis: Lean hog futures continue to fall under pressure despite strengthening fundamentals. The July contract went off the board at $102.35, a premium to the cash index, showing traders expect the seasonal cash rally to extend to Wednesday, when the CME lean hog index quote for today, which is what the contract is cash settled against, is released. The CME confirmed Thursday’s quote for the index up 74 cents to $101.03 and the index is expected to gain an additional 57 cents to $101.60 according to Friday’s preliminary quote. The steep discount the August future holds to the cash index shows the pessimism of hog traders, though we believe consumer demand will provide a floor under cash prices in the coming month as BLT season is upon us. Increased demand paired with seasonally weak slaughter numbers until the first week of August will continue to help extend the seasonal cash advance well into the summer.

The midsession pork cutout quote showed carcass weights extending Friday’s jump higher by an additional 45 cents to $116, the highest level since last August. Though overall cutout rose, the interior components varied wildly, with hams and ribs plummeting nearly $10 each and bellies extending over $14 higher than Friday, nearly $50 higher than a week ago. The cutout did little to stifle selling in the futures market though as price struggles to overcome technical resistance.

Technical analysis: August lean hogs have posted a series of higher lows and lower highs as the market tightens before its next move. Cash fundamentals have remained strong, but traders are pessimistic over the upcoming months. The bulls remain in control of the near-term technical advantage, targeting a daily close over $100 for the first time since March. Resistance lies at the 200-day moving average at $95.075, backed today’s high of $97.9. Bulls want to defend support starting at today’s low of $94.05, backed by $93.8, then the 20-day moving average at $93.3. Additional selling pressure would weaken the bull’s grasp on the technical advantage and start to favor the bears.

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 have all July soymeal needs covered in the cash market, with half of your August needs also covered. You should have your July corn-for-feed needs covered in cash.

 

 

Cattle

Price action: August live cattle fell 5 cents to $180.125 today and nearer the session low after hitting another contract high early on. August feeder cattle gained $2.60 to $249.25, a fresh contract high close.  

Fundamental analysis: Still firmly bullish technical and a strong cash market continue to fuel the cattle futures markets to the upside. There are once again bullish expectations for cash cattle trade later this week. Last week’s average cash cattle trading price was $184.27, up $2.21 from the week-prior. The stronger northern market pulled the average higher last week. The same may occur again this week. The monthly USDA cattle-on-feed report Friday afternoon may push cash cattle negotiations into Friday P.M.

The noon report showed Choice-grade wholesale boxed beef prices rose $1.13 to $307.07, while Select grade fell 35 cents to $276.26. Movement at midday totaled 53 loads. The Choice-Select spread is presently at $30.81. The Choice-Select beef price spread remains wide, suggesting still-tight supplies of high-quality cattle and beef.

More upbeat consumer attitudes as U.S. inflation is receding while the U.S. stock indexes are near their highs for the year are also making beef more appealing at the meat counter.

Technical analysis: The live and feeder cattle futures bulls have the solid overall near-term technical advantage. Prices are in uptrends on the daily bar charts. The next upside price objective for the live cattle bulls is to close August futures above solid resistance at $185.00. The next downside technical objective for the bears is closing prices below solid technical support at $175.00. First resistance is seen at today’s contract high of $181.60 and then at $182.50. First support is seen at $179.00 and then at $178.00.  The next upside price objective for the feeder cattle futures bulls is to close August prices above technical resistance at $255.00. The next downside price objective for the bears is to close prices below solid technical support at $238.00. First resistance is seen at today’s high of $249.95 and then at the contract high of $251.30. First support is seen at $247.00 and then at today’s low of $245.30.

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 have all July soymeal needs covered in the cash market, with half of your August needs also covered. You should have your July corn-for-feed needs covered in cash.

 

 

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