Livestock Analysis | September 28, 2023
Price action: Expiring October hog futures rallied $1.825 to $83.95 Thursday, while most-active December jumped $2.75 to $75.525.
Fundamental analysis: The latest fundamental news concerning hogs and pork wasn’t particularly supportive, with export sales weak and pork prices sliding. Pork cutout slipped below $100.00 last week and remained below that level this week. The midsession quote fell another $1.56 to $96.20 on across-the-board losses by the various cuts. Bulls likely derived some comfort from the hog index slipping just 17 cents to $86.14 Tuesday, with Wednesday’s preliminary quote proving unchanged at that same level.
Thus, an explanation for today’s futures surge doesn’t leap out at the casual observer. Concurrent live cattle strength likely spilled over into the hog market. The buying may also have been exaggerated by widespread short-covering ahead of this afternoon’s (2:00 pm CDT) release of the quarterly USDA Hogs & Pigs report (See Evening Report for the results). Although the report is expected to show largely flat population totals versus year-ago level, and is unlikely to reveal many surprises, bearish traders may harbor concerns in the face of the market’s summer strength and the comparative stability seen lately.
Technical analysis: Today’s big futures surge seemed to give bulls in the most-active December contract the short-term technical advantage. Having the rally crush resistance associated with the contract’s 20-, 10- and 40-day moving averages, near $74.75, $74.37 and $74.16, respectively, flipped those to significant support levels. A drop below the latter would have bears targeting Monday’s low at $71.625. Today’s high marks initial resistance at $76.10, with a push above that point opening the door to a retest of last week’s high at $78.70.
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 futures rose $1.60 to $186.50. December live cattle gained $2.25 at $190.425. October feeders rose $2.475 to $254.725, while November feeder cattle closed up $2.875 at $257.675. November feeders hit a four-week low early on before rebounding strongly.
Fundamental analysis: The cattle futures markets saw corrective bounces from early-week selling pressure. Still-solid cash market fundamentals and futures charts that are still overall bullish fueled today’s price gains, including perceived bargain buying from the bulls after the recent sell offs.
Cash cattle trade so far this week has slipped from last week’s average of $184.73, to $183.58, with additional weakness expected when more cash trade takes place late today or Friday. Conversely, today’s sharp futures bounce could cause producers to demand higher bids from packers. The noon report today showed Choice grade boxed beef up 53 cents to $301.48, with Select grade down 29 cents to $278.22. Movement at midday was decent at 70 loads. The Choice-Select spread is currently $23.26.
USDA reported upbeat U.S. beef export sales of 17,700 MT for 2023, up 29% from the previous week and up 42% from the four-week average.
Technical analysis: The live cattle futures bulls have the solid overall near-term technical advantage and regained some momentum today. However, a five-week-old uptrend on the daily bar chart has stalled out. The next upside price objective for the bulls is to close December futures above solid resistance at the contract high of $192.05. The next downside technical objective for the bears is closing prices below solid technical support at $185.00. First resistance is seen at today’s high of $191.50 and then at $192.05. First support is seen at this week’s low of $187.725 and then at $186.00.
November feeder cattle futures prices scored a bullish “outside day” up today. The bulls have the overall near-term technical advantage but have faded recently. The next upside price objective for the feeder bulls is to close November futures prices above technical resistance at $263.00. The next downside price objective for the bears is to close prices below solid technical support at the August low of $248.925. First resistance is seen at today’s high of $258.425 and then at $260.00. First support is seen at today’s low of $254.05 and then at $253.00.
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.
