Livestock Analysis | August 28, 2023
Price action: October lean hogs rose $2.025 at $81.85 and near the session high.
Fundamental analysis: The hog futures market was lifted in part by gains in the cattle futures markets and a solid rise in pork cutout value at midday.
The hog futures’ discounts to the cash market today tightened up, but October futures are still trading over $12.00 below the cash index. The latest official CME lean hog index quote is down $1.22 to $95.18, while the preliminary calculation puts the index down another $1.29 to $93.89 as of August 25, which marks the biggest decline since the seasonal downturn in early August. The five-day national direct cash hog price quote today is $87.86. The noon report showed pork cutout value rebounding by $4.06 to $97.48, with most of the gain coming from a nearly $25 rise in bellies. Movement at midday was 137.31 loads.
The lean hog futures bears are looking at seasonals turning in their favor, as the grilling season is ending this coming Labor Day holiday weekend. Also hog slaughter levels tend to rise this time of year.
Technical analysis: The lean hog futures bears have the slight overall near-term technical advantage. Prices are in a downtrend on the daily bar chart. The next upside price objective for the hog bulls is to close October prices above solid chart resistance at the August high of $82.475. The next downside price objective for the bears is closing prices below solid technical support at $77.50. First resistance is at last week’s high of $83.125 and then at $84.00. First support is seen at $80.00 and then at today’s low of $78.85.
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: Cash corn-for-feed and soymeal coverage expired in mid-August. Wait on signs of market lows before extending coverage.
Price action: October live cattle rose 37 1/2 cents to $181.55 and near mid-range. Prices hit a two-week high today. October feeder cattle gained $3.05 to $257.025. Prices closed nearer the session high and hit a contract high.
Fundamental analysis: Technical buying was featured in the cattle futures markets today as both feeder and live cattle charts fully favor the bullish camps at present.
Impressive for feeder cattle futures today was solidly higher price action despite gains in corn futures prices to start the week. Cash feeder cattle prices today were reported solidly up to start the week.
Futures traders today brushed aside cash market fundamentals that have deteriorated just a bit recently. Last week’s average cash cattle trade was $182.75, down $2.29 from the week prior. We look for cash cattle trading this week to be around steady in a stand-off that may last into late week. The noon beef report today showed Choice grade cutout down $1.18 to $316.72 and Select grade down 23 cents at $292.44, bringing the Choice/Select spread to $24.28. Movement at midday was 55 loads. The recent rise in cutout value has driven packer margins back into the black, possibly encouraging them to pay up in the cash market later this week.
Seasonally, cattle traders are beginning to look at the bearish aspect of this coming Labor Day holiday weekend being the last big grilling weekend of the year.
Technical analysis: The live cattle futures bulls have the firm overall near-term technical advantage. 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 the August low of $177.625. First resistance is seen at $182.50 and then at the August high of $183.725. First support is seen at today’s low of $180.40 and then at $179.00.
The feeder cattle futures bulls have the strong overall near-term technical advantage and gained fresh power today. 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 the August low of $248.05. First resistance is seen at $257.00 and then at $258.00. First support is seen at $255.00 and then at today’s low of $253.925.
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: Cash corn-for-feed and soymeal coverage expired in mid-August. Wait on signs of market lows before extending coverage.
