Livestock Analysis | July 13, 2022
Hogs
Price action: July lean hogs rose 90 cents at $114.50. August hogs closed up $1.50 at $110.50, near mid-range and closing at a 2.5-month high close.
Fundamental analysis: The lean hog futures market was boosted today by the prospect of strengthening cash fundamentals and an improving near-term technical posture. July lean hog futures presently show a solid $1.43 premium to the cash index heading into the July contract’s expiration Friday and settlement July 19. The CME lean hog index (as of July 12) is projected up 23 cents at $112.80. The noon pork report today showed cutout value $1.32 at $118.79 (a new high for the year), led by gains in loins. Movement was 135.77 loads.
Seasonally tight hog supplies are also supporting the cash and futures markets. Pork demand at the meat counter is also solid, as retail beef prices remain elevated. However, hog slaughter numbers will likely begin moving higher in the latter half of July and then surge by mid-August. Thus, the August futures are holding a large discount to the July contract.
Traders are awaiting Thursday’s weekly USDA export sales report, which has shown disappointing numbers recently, mostly due to China backing off on its purchases of U.S. pork. China imported 603,000 MT of meat in June, up 1.5% from May but down nearly 19% from last year. Through the first six months of this year, China imported 3.5 MMT of meat, down 31.9% from the same period last year, mostly due to a sharp reduction in pork imports.
Technical analysis: Lean hog futures bulls have the overall near-term technical advantage. The next upside price objective for the hog bulls is to close August prices above solid chart resistance at $115.00. The next downside price objective for the bears is closing prices below solid technical support at this week’s low of $106.45. First resistance is seen at the July high of $111.75 and then at $113.00. First support is seen at today’s low of $109.725 and then at $109.175.
What to do: Be prepared to extend feed coverage when market bottoms are in place.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You are hand-to-mouth on corn-for-feed and soybean meal needs.
Cattle
Price action: August live cattle closed up 20 cents at $136.875 and nearer the session high. Prices hit a three-week high today. August feeder cattle closed up $1.225 at $180.80, near the session high and hit a 13-week high.
Fundamental analysis: Improving cash market fundamentals supported gains in the cattle futures markets today. At mid-week, only light cash cattle trade has occurred at an average price of $145.88, according to USDA. That’s up from last week’s average of $144.35. Cash sources reported light trade around $137 in the Southern Plains this morning, with a starter trade at $145 in the northern market. The noon beef report today showed Choice grade down 7 cents at $268.44 and Select grade down 37 cents. Movement was 71 loads.
Cattle market bulls are arguing that with market-ready supplies likely to remain tight in the coming weeks, the normal seasonal pattern of weaker cash prices should be limited this summer. Also, despite recession worries, red meat demand at the meat counter has been solid recently.
Feeder cattle futures showed resilience today despite gains in the corn futures market and the large premiums to the cash feeder cattle index.
Traders are awaiting Thursday morning’s weekly USDA export sales report. Recent U.S. beef sales abroad have been solid.
Technical analysis: Live cattle futures bulls have the slight overall near-term technical advantage. Their next upside price objective is to close August futures prices above solid resistance at the June high of $137.95. The next downside technical objective for the bears is closing prices below solid technical support at the June low of $131.70. First resistance is seen at $137.95 and then at $139.00. First support is seen at today’s low of $135.95 and then at $135.00.
August feeder cattle futures prices this week have seen a big and bullish upside “breakout” from a recent trading range on the daily bar chart. Bulls have the firm overall near-term technical advantage. The next upside price objective for the feeder bulls is to close August futures prices above technical resistance at the March high of $182.10. The next downside price objective for the bears is to close prices below solid technical support at $173.00. First resistance is seen at $182.00 and then at $183.00. First support is seen at today’s low of $178.175 and then at $176.00.
What to do: Be prepared to extend feed coverage when market bottoms are in place.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You are hand-to-mouth on corn-for-feed and soybean meal needs.
