Livestock Analysis | August 29, 2022
Price action: October lean hogs rose $1.60 to $92.25, near the session high.
Fundamental analysis: Hog futures were supported by short covering and corrective buying as the market consolidated following sharp losses the past two weeks. October futures are still over $20 below the CME lean hog index, which suggests the futures have more room on the upside, but also underscores the bearish near-term trader attitudes. The CME lean hog index fell $2.73 today (as of Aug. 25) to $113.32, the lowest since July 12. Tomorrow’s quote (for Aug. 26) is projected down another $2.06. Pork cutout values early today rose $7.03 to $109.26, led by gains in bellies and picnics. Movement at midday was strong at 190.26 loads. The national direct five-day rolling average cash hog price today was quoted at $120.29.
Technical analysis: Hog market bears hold a near-term technical advantage with prices in a steep two-week downtrend on the daily bar chart. The next upside objective for bulls is to close October futures above solid resistance at $96.00. The next downside objective for bears is closing prices below solid support at the July low of $86.825. First resistance is seen at $93.00, then $94.00. First support is seen at $91.00, then the August low of $90.00.
Key for the bulls will be to show good follow-through buying strength on Tuesday that would then begin to suggest a near-term market bottom is in place.
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.
Price action: October live cattle fell 15 cents to $142.90, the contract’s lowest closing price since Aug. 2. October feeder cattle fell $2.325 to $181.075, a seven-week closing low.
Fundamental analysis: Live cattle futures extended last week’s declines to settle near four-week lows amid erosion in cash and wholesale beef markets. Feeder cattle took sharp losses as the corn market rallied to two-month highs. Live steers averaged $144.79 last week, down $2.34 from the previous week’s average and ending a run of three consecutive weekly gains. This week’s cash outlook is unclear, but futures’ recently soft performance suggests traders expect further weakness. Market-ready supplies are tightening, and feedlots are current on marketings, but packers were passive buyers last week, and this week’s cash trade isn’t likely to turn active until midweek or later.
Beef demand held up relatively well over the summer despite high retail prices, but the end of the grilling season could put further pressure on the wholesale market. Choice beef cutout values rose 76 cents early today to $263.52, but midday movement was light at 43 loads. Choice values fell $1.52 last week.
Technical analysis: Live cattle technicals bearish for the near-term, with the October contract trending lower for nearly two weeks. October futures today fell as low as $142.65, the contract’s lowest intraday price since Aug. 3 and just above 40-day moving average support around $142.60. A push under that level may have bears targeting the 50-day moving average around $142.15. Additionally downside targets include $142.00 and $141.00. Near-term upside targets include the 20- and 10-day moving averages at $144.15 and $144.40, respectively.
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.
