Hogs
Price action: July lean hogs closed $2.325 higher at $111.80, near session highs.
Fundamental analysis: July hog futures posted a fresh contract high today as strength in cash fundamentals continues to support strong gains in futures. Bulls continue to hold the momentum and have taken advantage of bullish sentiment. Strong gains in the cattle markets, supported by steep discounts to the cash market, also supported hog futures today. The CME lean hog index continues to chip higher, rising another $1.05 to $102.81 as of June 12. The preliminary calculation puts the index up another 89 cents to $103.70 for tomorrow’s quote. Recent strength in pork cutout has helped fuel the cash hog market higher. Hog slaughter ran above a year ago last week and yet the index and cutout ran to the highest levels in over a year and a half. We continue to attribute strength in the hog complex to heightened demand, beginning at the grocery store. Cutout rose another 87 cents at midsession to $118.93, driven by strength in picnics and butts, though all cuts except ribs saw gains this morning.
Technical analysis: July hog futures continue to march higher on the daily bar chart. Bulls maintain full control of the technical advantage. Today’s high of $112.05 stands as initial resistance and is reinforced by resistance at $112.50. Support comes in at $10.0 then the prior contract high of $109.625, while additional selling has bears eyeing support at $108.04, the 10-day moving average.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
Feed needs: Cover half of your soymeal needs for August, September and October in the cash market. You already have all of your soymeal and corn-for-feed needs for the remainder of June and all of July covered in the cash market.
Cattle
Price action: August live cattle rose $3.10 to $215.55, nearer the daily high. August feeder cattle rose $3.80 to $310.225, nearer the session high.
Fundamental analysis: The cattle futures markets bulls got back to work today following Friday’s profit-taking setbacks that came amid keener risk aversion in the general marketplace. Improved trader/investor risk appetite today gave the cattle bulls confidence to step back in on the long side. The steep discounts that cattle futures continue to hold to the cash markets also supported buying interest in futures today.
Cash cattle and beef market fundamentals remain historically strong. USDA reported last week’s average cash cattle trade was another record high average, up $2.06 from the week prior at $238.68. That’s the eighth consecutive week of record high average cash cattle trade. We look for at least steady cash trade to occur later this week—possibly as late as Friday afternoon following the USDA monthly cattle-on-feed report. The noon report today showed wholesale beef values higher, with Choice-grade up $2.03 to $379.91, while Select-grade rose $2.67 to $366.17. Movement at midday was light at 47 loads. The Choice-Select spread is presently $13.74.
Technical analysis: Live and feeder cattle futures bulls have the solid overall near-term technical advantage. The next upside price objective for the live cattle bulls is to close August futures above resistance at the contract high of $220.05. The next downside technical objective for the bears is closing prices below solid technical support at $210.00. First resistance is seen at last Friday’s high of $216.525 and then at $218.00. First support is seen at last week’s low of $212.25 and then at $211.00.
The next upside price objective for the feeder bulls is to close August futures prices above technical resistance at $318.00. The next downside price objective for the bears is to close prices below solid technical support at $300.00. First resistance is seen at today’s high of $310.80 and then at the contract high of $314.20. First support is seen at last week’s low of $305.80 and then at $304.00.
What to do: Get current with feed coverage. Carry all production risk in the cash market for now.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: Cover half of your soymeal needs for August, September and October in the cash market. You already have all of your soymeal and corn-for-feed needs for the remainder of June and all of July covered in the cash market.