Livestock Analysis | August 10, 2023

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: Expiring August lean hog futures edged up 7.5 cents to $101.725 Thursday, while most-active October fell $1.25 to $80.325.

Fundamental analysis: Bearish expectations continued dominating hog futures Thursday despite stable cash prices and a big midsession bounce in wholesale values. The CME officially confirmed the latest hog index quote, for Tuesday, at $104.34, down 24 cents from Monday. Today’s USDA data puts Wednesday’s preliminary quote at $103.91, down another 43 cents. Traders reacted by boosting expiring August futures a bit at the daily close (It expires Aug. 14, the tenth business day of the month). Conversely, they pushed the deferred contracts to larger discounts below cash in anticipation of the traditional late summer-fall cash breakdown.

Traders were apparently unpersuaded by today’s virtual $40.00 leap in pork belly prices or the resulting $8.11 jump, to $117.23 (a new 2023 high), in pork cutout. Serious doubts about the sustainability of that surge are largely warranted, but the indicated underlying hog/pork strength might easily persist in the coming days and weeks due to reduced retail costs to consumers and the likely positive impact upon their pork buying patterns.   

Technical analysis: Bears apparently hold the short-term technical advantage in October hog futures after the market fell below the contract’s 40-day moving average near $82.07 Wednesday. Today’s gap lower puts initial resistance at $81.425, with considerable reinforcement from yesterday’s low at $81.475. A push above that area, as well as the 40-day moving average would have bulls targeting the looming confluence between the contract’s 20- and 10-day moving averages near $83.50 and $83.80, respectively. Today’s low marks initial support at $80.40, which is likely to be bolstered by the psychologically important $80.00 level. A drop below that point would open the door to a retest of the June 30 low of $77.575.

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 should have all soymeal and corn-for-feed needs covered in the cash market through mid-August.

 

 

Cattle

Price action: October live cattle rose 82 1/2 cents to $182.525 and nearer the session high. October feeder cattle gained $1.175 at $253.325 and near mid-range.

Fundamental analysis: Technical buying was featured in the cattle futures markets today, as live and feeder contracts remain in price uptrends and are near their recent highs. Fundamentally, traders anticipate cash cattle prices will trade at higher price levels again this week. Cash activity has been light so far, but feedlot operators seemingly have the upper hand, as indicated by Wednesday’s cash average at $187.96. The noon report today showed Choice grade beef down 34 cents at $303.18, while Select grade was up 6 cents at $278.20. Movement at midday was 65 loads. The Choice-Select spread is $24.98. Mixed grain and soy prices seemed to exert little influence over feeder futures today.

Cattle and beef production are increasing seasonally with retailers buying for planned Labor Day features. These circumstances hint the cash cattle and futures markets could post new record highs in mid-August. However, steady wholesale prices recently may be signaling higher prices are somewhat curbing demand and limiting upside potential this fall.

This morning USDA reported U.S. beef sales of 14,800 MT for 2023, which were up 19% from the previous week but down 8% from the four-week average.

Technical analysis:  The live and feeder cattle futures bulls have the solid overall near-term technical advantage. A five-month-old uptrend is in place on the daily bar chart for live cattle futures. The next upside price objective for the bulls is to close October futures above solid resistance at the contract high of $185.75. The next downside technical objective for the bears is closing prices below solid technical support at $175.00. First resistance is seen at last week’s high of $183.725 and then at $185.75. First support is seen at today’s low of $181.45 and then at $180.00.  Feeder cattle futures are also trending higher on the daily bar chart. The next upside price objective for the feeder bulls is to close October futures prices above technical resistance at $260.00. The next downside price objective for the bears is to close prices below solid technical support at $247.50. First resistance is seen at today’s high of $254.15 and then at the contract high of $256.25. First support is seen at $251.00 and then at this week’s low of $249.65.

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 should have all soymeal and corn-for-feed needs covered in the cash market through mid-August.

 

 

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