Hogs
Price action: August lean hogs fell $1.45 to $103.225, marking the lowest close since May 27.
Fundamental analysis: Returned cash hog weakness combined with deteriorating wholesale value sent nearby futures to the lowest intraday level since late May. Technical headwinds and hefty profit-taking in cattle futures also weighed on hog futures to start the week.
The recent uptick in the CME lean hog index seemingly proved to be temporary, though tomorrow’s preliminary quote shows the index up 15 cents to $107.25 cents. Meanwhile, wholesale volatility weighed on futures, though futures’ discounts to the cash index, along with grilling season demand may limit extended seller interest as the week progresses. Though rising slaughter levels and looming demand unknowns may crimp the upside. In the noon report, pork cutout rose $1.73 to $115.20, led by gains in all cuts aside from primal butts.
In June, China imported 533,000 MT of meat, which was up 3.9% from May and 2.5% from year-ago. However, through the first half of this year, China imported 3.2 MMT of meat, down 2.7% from the same period last year. Traders will continue to eye Chinese demand for pork as that country battles deflationary conditions along with an unsettled trade environment.
Technical analysis: August lean hogs have broken down technically, though support at the 100- and 200-day moving average, trading at $101.14 and $99.93 should curb sellers, though bears continue to eye the April 9 low of $86.00 cents. Conversely, bulls face notable resistance at 10-, 40- and 20-day moving averages, trading at $106.37, $107.20 and $108.92, with sights set on taking out the June 18 high of $113.15.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
Feed needs: For soymeal, you have full coverage in cash through July, with half of your needs for August, September, October, November and December covered in cash. For corn, you have all needs through August covered in the cash market, with half of your needs for September and October covered in cash.
Cattle
Price action: August live cattle fell $2.85 to $219.35, near the daily low. August feeder cattle lost $5.85 to $319.475, near the session low.
Fundamental analysis: The cattle futures markets faced, what is so far just, routine profit-taking pressure to start the trading week after last week’s push to contract and record highs. However, cash cattle and beef market fundamentals have weakened a bit.
Cash cattle trading last week averaged $237.21, which is up $7.78 from the week prior and the second-highest on record. Live cattle futures remain at steep discounts to the cash cattle market. The combination of higher cash cattle prices last week and sharply lower wholesale prices last week has pushed beef packer margins back into the red. Margins in the red may have packers reluctant to bid up for cash cattle this week. However, supplies in feedlots remain tight. The noon report today showed boxed beef cutout values weaker again. Choice-grade fell 58 cents to $378.06 and Select was also down 58 cents to $365.91. Movement at midday was 54 loads. On Friday wholesale beef values plunged, with Choice down $6.02 and Select down $4.37.
Technical analysis: Live and feeder cattle futures bulls still 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 $225.00. The next downside technical objective for the bears is closing prices below solid technical support at $212.50. First resistance is seen at today’s high of $222.175 and then at the contract high of $223.275. First support is seen at today’s low of $219.00 and then at $217.00.
The next upside price objective for the feeder bulls is to close August futures prices above technical resistance at the contract high of $326.875. The next downside price objective for the bears is to close prices below solid technical support at $309.00. First resistance is seen at $321.00 and then at $323.00. First support is seen at $318.00 and then at $316.00.
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: For soymeal, you have full coverage in cash through July, with half of your needs for August, September, October, November and December covered in cash. For corn, you have all needs through August covered in the cash market, with half of your needs for September and October covered in cash.