Livestock Analysis | June 29, 2023
Price action: Summer hog futures turned higher after opening poorly Thursday. Nearby July closed $1.175 higher at $95.45, while most-active August advanced $1.225 to $92.325. The deferred contracts slipped again.
Fundamental analysis: Bulls are likely being encouraged by the sustained advance in the CME hog index. The preliminary rise of 44 cents anticipated for Tuesday’s official quote was confirmed, putting the cash market equivalent at $92.96. The unofficial calculation for Wednesday gained another 46 cents to $93.42, again marking its highest quote since last October. But the likely development that powered the bullish intraday reversal almost surely came from the wholesale market. Bears were probably thinking Wednesday’s wholesale weakness presaged much more of the same, but that certainly wasn’t the case this morning. Loin and butt values dipped a bit, but big gains posted by ribs, hams and bellies boosted the midsession cutout quote $4.72 to $103.80. That essentially matched its highest level seen last October. We don’t doubt that the market will give back a big portion of that advance this afternoon, but we still tend to expect more of the same in the days and weeks ahead, which seems likely to provide sustained support for the hog market.
The quarterly USDA Hogs & Pigs Report is set for release at 2:00 pm CDT. It’s expected to show a slight decline in the market hog herd, with second-half 2023 slaughter rates running about 1% under to even with comparable year-ago levels. But the farrowing intentions numbers are expected to imply a 2%-3% reduction in hog supplies during the first half of 2024. See Evening Report for the numbers and our analysis.
Technical analysis: Bulls clearly own the technical advantage at this juncture, especially with the high range close pushing the market well above recently solid support at the 10-day moving average (now near $91.12). That’s backed by the psychological $90.00 level, as well the lows posted today, at $89.825, and Tuesday, at $88.33. A drop below the latter point would again have bears targeting the 40-day moving average near $85.80. Today’s high marked initial resistance at $93.00, with a push above that point opening the door to a test of last week’s high of $93.825, the April high at $94.95, then potentially the psychological $100.00 level.
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 soymeal needs covered in the cash market through June, with half of your needs for July and August also covered in the cash market. You are hand-to-mouth on corn-for-feed needs.
Cattle
Price action: August live cattle rose 62 1/2 cents to $174.50 and near the session high. August feeder cattle gained $2.125 to $242.375, near the session high and hit a three-week high.
Fundamental analysis: The cattle futures markets rallied today, led by gains in feeders amid the steep drop in corn futures prices this week. Weakening cash market fundamentals did somewhat limit the upside in the live cattle futures market today, but futures are still at a significant discount to the cash market.
Cash cattle trade occurred at mid-week and was around $2 lower than last week’s levels in both the Southern Plains and northern market. The noon report showed wholesale beef prices rebounded with Choice grade up 92 cents at $328.82, while Select grade gained $1.71 to $298.39, taking the Choice/Select spread to $30.43. Movement at midday totaled 53 loads. USDA reported net U.S. beef sales of 12,000 MT for 2023, down 9% from the previous week and 16% below the four-week average.
It appears the tight supply of market-ready cattle seen in the spring is starting to be alleviated. Steer dressed weights are presently running just above year-ago levels and well above the five-year average.
Technical analysis: The live and feeder cattle futures bulls have the firm overall near-term technical advantage. The next upside price objective for live cattle bulls is to close August futures prices above solid resistance at the contract high of $178.10. The next downside technical objective for the bears is closing prices below solid technical support at last week’s low of $168.10. First resistance is seen at $175.00 and then at $176.00. First support is seen at Wednesday’s low of $172.30 and then at $171.00. The next upside price objective for the feeder bulls is to close August futures prices above technical resistance at the contract high of $245.175. The next downside price objective for the bears is to close prices below solid technical support at $235.00. First resistance is seen at $244.00 and then at $245.175. First support is seen at today’s low of $239.325 and then at Wednesday’s low of $238.00.
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 soymeal needs covered in the cash market through June, with half of your needs for July and August also covered in the cash market. You are hand-to-mouth on corn-for-feed needs.
