Livestock Analysis | August 31, 2023

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: Hog futures gave back a substantial portion of Wednesday’s gains on Thursday. Nearby October tumbled $1.05 to $82.55.

Fundamental analysis: It wasn’t terribly surprising to see hog futures fall Thursday, especially after the nearby October contract leapt almost limit-up Wednesday despite sustained cash and wholesale weakness. Indeed, the CME lean hog index for Tuesday matched the big ($1.74) loss to $90.67 indicated by the preliminary data. Today’s calculation for Wednesday dropped another $1.41 to $89.26. Pork cutout did bounce modestly at midsession after having posted another decline yesterday afternoon. We still suspect traders think the cash market will stabilize and possibly rally during September, which isn’t all that unusual from a historical standpoint.

Much depends upon the strength of consumer demand for pork, which seems likely to prove comparatively strong given the big increases in retail beef prices posted this summer. Ham and pork chop costs to consumers are also comparatively high, but pork belly prices remain well below last year, while ‘other’ pork (including ribs and sausages) fell 2.4% annually during July.

Technical analysis: Having October futures settle above initial support at the 40-day moving average near $82.17 left the bulls with the short-term moving average. A clear drop below that point would have bears targeting the intersection of the 10- and 20-day moving averages around $81.00, then the August low of $77.75. Today’s opening quote and yesterday’s high place initial resistance around $83.80, with close backing from today’s high of $84.25. A bullish breakout above that point would open the door to a retest of the August 1 high of $86.75.

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 corn-for-feed and soymeal needs covered in the cash market through September. 

 

 

Cattle

Price action: October live cattle futures rallied 77.5 cents before closing at $180.825, while August futures expired 92.5 cents higher at $179.725 at noon today. October feeder futures rose 80 cents to $256.025. August feeder futures expired 95 cents lower at $249.10 at noon.

Fundamental analysis: Live cattle futures showed strength in the latter half of the session, led higher by the August future, which went off the board at noon today. While futures have been consolidating from recent highs for most of this week, prices broke higher today as cash trade maintains strength, though volume has been fairly light so far this week. The cash average is $186.57 so far this week, up from $182.75 last week. As packers and producers both feel they have an edge, negotiations could be pushed late in the week once again, and may be delayed until after the upcoming three-day weekend. Market-ready supplies remain tight, but decreasing consumer demand due to high beef prices could limit continued price gains.

Wholesale prices were mixed at midsession, with both cutouts moving the opposite direction of yesterday’s mixed action. Choice fell 72 cents at midsession to $314.39, while Select rose $1.49 to $291.02, narrowing the Choice/Select spread to $23.37. Similar to futures, wholesale prices have been largely sideways this week.

Feeder futures rallied despite moderate strength in the corn market. Corn futures are at a pivotal point and are nearing a technical breakdown, which would add fuel to an already bullish feeder market.

Technical analysis: October live cattle futures tagged the 40-day moving average before reversing higher mid-morning and closing near the highs. The $180.00 level will remain an important pivot, quickly backed by $179.60 support. Bulls retain the technical advantage as they target the downward trend from July and August highs at $181.40. A daily close above this level would indicate a technical breakout and target $183.00 resistance.

October feeder futures continue to show impressive strength despite profit-taking the past two sessions. Bulls retain the technical advantage, especially after today’s confirmation of 10-day moving average support at $254.35. Further support comes in at $243.20, while bulls target resistance at $257.00, then the contract high at $257.925.

What to do: Get current with feed advice. Carry all production risk in the cash market for now but be prepared for some hedge coverage as we have demand concerns.  

Hedgers: Carry all risk in the cash market for now.

Feed needs: You should have all corn-for-feed and soymeal needs covered in the cash market through September. 

 

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