Livestock Analysis | July 19, 2023

Livestock Analysis | July
Livestock Analysis | July
(Pro Farmer)

Hogs

Advice: We advise livestock producers to extend corn-for-feed coverage another two weeks in the cash market through mid-August. 

Price action: August lean hogs rallied $1.65 to $97.925 and closed near the session highs, while deferred contracts closed mixed.

Fundamental analysis: August lean hogs surged as traders narrow the distance of the August future to the cash index. The underlying fundamentals of the hog market remain strong, evidenced by an increase in consumer demand, no doubt benefiting from steak prices reaching an all-time high in June while bacon prices fell 16% year-over-year according to the BLS. Bacon demand is likely to continue to rise, shown by belly prices continuing to rise in the midsession report today, jumping over $9. Carcass values rose 43 cents overall, with losses in both ribs and hams offsetting the jump in belly values. The CME confirmed the 93-cent rise in the hog index Monday to $102.53, matching the preliminary calculation. The USDA slaughtered swine report was delayed today due to Packer submission problems, so the calculation for Tuesday’s hog index quote will be delayed as well.

Growing geopolitical tensions in the Black Sea have caused increased volatility in the grain markets the last couple days, and no real end is in sight yet. This produces uncertainty in feed costs and the risk is disproportionate to the upside as feed costs could rocket higher overnight, leading us to extend feed coverage another two weeks into August.

Technical analysis: August lean hogs pushed higher into the recent resistance zone stemming from the July 6 high. Price remains in what appears to be a “bull flag” on the daily bar chart, with any additional buying indicating a breakout, targeting the July 6 high of $100.75 then $103.00 resistance. Bears want to reject off the upper end of this zone early in tomorrow’s session, targeting initial support at the 10-day moving average at $95.85, then Monday’s low of $94.05.

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: NEW ADVICE -- Extend corn-for-feed coverage another two weeks in the cash market through mid-August. You also have all soymeal needs covered in the cash market through mid-August.

 

 

Cattle

Advice: We advise livestock producers to extend corn-for-feed coverage another two weeks in the cash market through mid-August. 

Price action: Live cattle futures rebounded from early losses, with the August contract rising 5 cents to $181.325. Feeder futures also bounced from early lows as corn futures set back; August feeders slid $1.20 to $246.80.

Fundamental analysis: There was little news from the country markets yesterday, particularly pertaining to quotes for live cattle sold FOB. However, light trading of animals live- and dressed-delivered brought quotes steady with or modestly below last Friday’s levels. That news, along with the big futures gains posted yesterday, as well as today’s late firmness suggest producers are going to be able to force packers to pay up for fed cattle again this week. Wholesale prices proved mixed at noon; choice cutout slipped 74 cents to $304.68, whereas select cutout rose 55 cents to $277.16. The choice-select spread narrowed to a still-wide $26.78. This still points to comparatively tight supplies of market-ready fed cattle. We continue harboring strong suspicions the wholesale market will post a mid-summer surge similar to that of August 2021 in the weeks ahead.

Feeder cattle futures suffered substantial early losses in response to big gains across the grain and soy complex, especially after Russian officials stated they would view all ships entering Ukrainian ports as carrying war-related materials and would treat them as such. The late corn setback triggered renewed buying in feeder futures due to the implied reduction in feed costs.  

Technical analysis: Bulls still own the short-term technical advantage in August live cattle futures. Look for initial resistance at the daily high of $181.875, which marked the second-highest all-time intraday high for nearby futures behind the June contract’s June 6 record peak of $182.875. Those represent likely resistance levels, with a breakout above them likely having bulls targeting the psychological $185.00 level, then $190.00. Initial support at today’s low of $180.05 is closely backed by the psychological $180.00 level, as well as the Tuesday and Monday lows of $179.825 and $179.70, respectively. A drop below the latter would open the door to a retest of 10-day moving average support near $178.44.

The short-term technical situation also favors bulls in the August feeder cattle market. Bears’ inability to force a close below the contract’s 10-day moving average near $246.34 again marked that level as initial support. It’s backed by today’s low of $244.75, as well as last Thursday’s low of $243.50. A breakdown below that point would have bears respectively targeting the contract’s 20- and 40-day moving averages near $242.53 and $240.05. Today’s high places initial resistance at $247.257, with added resistance layered between Tuesday’s low of $247.60 and the July 11 contract high of $251.30.

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: NEW ADVICE -- Extend corn-for-feed coverage another two weeks in the cash market through mid-August. You also have all soymeal needs covered in the cash market through mid-August.

 

 

Latest News

H&P Report negative compared to pre-report expectations
H&P Report negative compared to pre-report expectations

Nearly every category topped the average pre-report estimates.

After the Bell | March 28, 2024
After the Bell | March 28, 2024

After the Bell | March 28, 2024

Pro Farmer's Daily Advice Monitor
Pro Farmer's Daily Advice Monitor

Pro Farmer editors provide daily updates on advice, including if now is a good time to catch up on cash sales.

PF Report Reaction: Bullish USDA data for corn
PF Report Reaction: Bullish USDA data for corn

Corn planting intentions and March 1 stocks came in lower than expected.

Report Snapshot: USDA shows lighter-than-expected corn acres and stocks
Report Snapshot: USDA shows lighter-than-expected corn acres and stocks

USDA reported corn acres of 90.036 million acres for 2024 and March 1 stocks of 8.347 billion bu., both well below trade estimates. Soybean acres were slightly lower than expectations, while stocks were higher.