Livestock Analysis | September 21, 2023
Price action: Hog futures seemed to catch the brunt of Thursday’s big commodity sector sell-off, with nearby October diving $2.825 to $82.95.
Fundamental analysis: The commodity suffered a broad sell-off Thursday, possibly in response to Fed Chairman Powell’s post-meeting statements concerning the economy, inflation and future interest rate increases. The threat of resumed rate hikes probably triggered the broad selling, with only a few of the international-leaning commodities (e.g. cocoa, sugar) and energy sector (e.g. crude oil, distillates) posting gains.
The latest cash hog news was quite supportive. That is, although Tuesday’s hog index quote edged up 9 cents to $86.67 (as expected), the modest gain in the wake of the preceding slippage was not a strong endorsement of ideas seasonal strength will persist through September. But Wednesday’s preliminary index calculation advanced 50 cents to $87.17 and marked a fresh high for the late-summer move. Bears could point to yesterday’s late drop in pork cutout values (down $1.91 to $99.22), as well as today’s followthrough dip to $99.18, but that hardly seemed to justify the sharp futures drop. A resumption of seasonal strength seems rather likely in the days ahead, although the looming release of the USDA’s quarterly Hogs & Pigs report next Thursday (9/28) may render traders reluctant to establish fresh positions in the interim.
Technical analysis: Bulls still own the short-term technical advantage in October lean hog futures, but today’s breakdown weakened their hold. The drop through the 10-day moving average near $83.66 made that point initial resistance, whereas the daily low marks support at $82.725. Initial support stems from the contract’s 20-day moving average near $82.84. Look for stout backing from the 40-day moving average near $82.37. A close below the latter point would have bears targeting the psychological $80.00 level. Secondary resistance is likely to emerge around today’s high of $84.95, which is backed by Wednesday’s top at $86.125. A rebound above that point would have bulls targeting the Aug. 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.
Price action: October live cattle fell $1.80 to $184.975 and nearer the session low. October feeder cattle lost $2.80 at $257.775, nearer the session low and hit a two-week low.
Fundamental analysis: The cattle futures markets today fell victim to a broad raw commodity futures sell off following yesterday afternoon’s FOMC statement and press conference from Fed Chairman Powell that leaned even more hawkish than the marketplace expected. Higher interest rates for longer do not bode well for consumer confidence in the coming months, and that’s a negative for cattle markets as beef prices are already elevated at the meat counter.
Cash cattle trading so far this week has been mostly quiet, although the trading around $186.00 is well above last week’s levels. Conversely, today’s futures losses will likely deter packers from sustaining their early cash bids. It appears there will be a late-Friday trade, unless feedlots get nervous and want to move cattle. The 2:00 pm release of the monthly USDA Cattle on Feed report may also delay trading. The noon report today showed boxed beef cutout value rose 8 cents to $301.34 for Choice, while Select slipped 20 cents to $278.48. Movement was decent at 69 loads. The Choice/Select spread at midday was $22.86.
On the positive side, steer weights and the Choice/Select beef price spread continue pointing to a shortage of high-quality cattle and beef.
USDA this morning reported U.S. beef sales of 13,700 MT for 2023, which rose noticeably from the previous week and 15% from the four-week average.
Technical analysis: The live and feeder cattle futures bulls still have the firm overall near-term technical advantage. Prices are still in four-week-old uptrends on the daily bar charts. The next upside price objective for the live cattle bulls is to close October futures above solid resistance at $190.00. The next downside technical objective for the bears is closing prices below solid technical support at $180.00. First resistance is seen at today’s high of $186.525 and then at the contract high of $187.45. First support is seen at today’s low of $184.65 and then at $183.00. The next upside price objective for the feeder bulls is to close October futures prices above technical resistance at the contract high of $264.675. The next downside price objective for the bears is to close prices below solid technical support at the September low of $252.85. First resistance is seen at today’s high of $260.45 and then at Tuesday’s high of $262.80. First support is seen at $256.50 and then at $255.00.
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.
