Livestock Analysis | August 14, 2023
Price action: October lean hogs fell $2.175 before settling at $79.15, while the August contract expired at $102.25 at noon today, up 15 cents and a slight discount to the cash index.
Fundamental analysis: Lean hog futures resumed last week’s selling pressure as bears are vindicated by the falling cash index. Bears feel as though the bearish seasonal top is in place and futures point to a larger drawdown from the seasonal peak than is normal, with October futures over $20 below current cash prices. We see this as overly pessimistic, especially with continued wholesale strength, led by bellies as BLT season is still in full swing. Grocer and consumer demand remain robust as meat counters are offering pork specials as beef prices remain high. Market bears have not allowed much wiggle room with the discount built into futures, which makes the short side riskier than the long side at this juncture. The CME confirmed the 85-cent drop in the cash index to $103.06 as of August 9, with the preliminary calculation falling another 49 cents to $102.57 as of Thursday, August 10. August futures expired at noon today at $102.25 and will cash settle against today’s quote for the cash index, released on Wednesday.
Pork cutout jumped to a 2023 high at midsession, though gains are likely to be pared once afternoon trade is reflected. Carcass values jumped $7.70 to $117.78, led by e a$32.74 leap in bellies, though all values expect loins saw gains. Wholesale prices have been largely stagnant since mid-July, if prices begin trending higher now it could lend support to the falling cash market.
Technical analysis: October lean hogs continue to fall under selling pressure despite the steep discount to cash prices the contract maintains. Bears are in control of the technical advantage, targeting the June 30 low at $77.575. Very little support remains between current prices and there, though $78.50 could offer some reprieve. Bulls are targeting $81.50 which is a key pivot, further buying would find resistance at $82. Recent volatility is likely to continue until bulls can show support, likely near the $77.50 level.
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.
Price action: October live cattle fell 65 cents to $180.675. October feeder cattle lost $1.025 at $251.85. Prices closed nearer the session lows today.
Fundamental analysis: The cattle futures markets saw some more profit-taking pressure featured to start the trading week. Last week’s average cattle trading price was $185.88, down 82 cents, which was a bit of a surprise to many market watchers who were looking for firmer cash cattle prices from the previous week. Traders anticipate another week of lengthy cash cattle negotiations this week. It’s unlikely there will be active cash cattle trade ahead of USDA’s Cattle on Feed Report on Friday afternoon, unless packers get aggressive with bids. Friday’s COF report is likely to show continued tighter supplies of cattle. Placements will be key, with the trade not having much success at pegging the figure in recent COF reports.
The noon report showed wholesale beef prices up $2.68 at $305.29 for Choice grade. Select grade rose $2.38 to $279.61, taking the Choice/Select spread to $25.68. Movement at midday was light at 44 loads.
Retailers will probably have met the bulk of their needs for planned Labor Day features by late next week, at which point seasonal price pressure on cash and futures could develop. Consumers and grocers will likely begin shifting their focus away from steaks and toward cheaper roasts with the grilling season ending and the school year starting.
Technical analysis: The live and feeder cattle futures bulls have the firm overall near-term technical advantage. A five-month-old uptrend is in place on the daily bar chart for live cattle. The next upside price objective for the live cattle 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 $182.50 and then at the August high of $183.725. First support is seen at $180.00 and then at $170.00. 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 $253.55 and then at the contract high of $256.25. First support is seen at $251.00 and then at last 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.
