Hogs
Price action: August lean hogs rose 50 cents to $104.425, but ended near the session low.
Fundamental analysis: August lean hogs gapped higher at the open but were limited by technical resistance and ultimately marked a low-range close. Today’s gains were certainly corrective in nature, though extended gains in the cattle complex continued to prove supportive. Meanwhile, the CME lean hog index continues to prove choppy, with a series of “up” and “down” days. However, pork cutout continues to hold steady, despite recent volatility in specific cuts. The noon report showed cutout up 33 cents to $114.35, led by gains in bellies and ribs. Movement totaled 150.6 loads at midday.
USDA will release its weekly export sales data early Thursday morning, which will be closely monitored by traders. Last week, net sales for the week ended July 3 declined 11% from the previous week and 17% from the four-week average.
Technical analysis: August lean hogs ended the session near the session low after gapping higher to start the day. Bulls are eying the June 17 high of $113.375, though initial resistance stands at the 10-, 40- and 20-day moving averages, layered from $105.76 to $108.20. Meanwhile, bears continue to look towards the April 9 low of 86.00 cents, though initial support lies at $103.63, then $103.04, $102.16 and the 100- and 200-day moving averages.
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 rose $1.50 to $223.90, nearer the daily high and hit a contract/record high. August feeder cattle rose $3.30 to $325.575, near the session high.
Fundamental analysis: The cattle futures market bulls continue to exhibit buying interest at historically elevated price levels. The steep discount live cattle futures hold to the cash cattle market continues to encourage the futures market bulls. Very light cash cattle trading so far this week has seen steers fetch an average price of $230.79 and heifers $231.13, according to USDA at midday today.
Beef market fundamentals have deteriorated a bit at mid-week. The noon report today showed Choice grade boxed beef cutout value down $4.11 at $373.61 and Select grade down $1.73 at $360.85. However, boxed beef movement was good at the lower price levels, at 104 loads at midday. The Choice-Select spread is presently $12.76. Packers are back to cutting in the red at present.
U.S. trade tensions are heating up with Brazil. Brazilian meatpackers are considering whether to make new shipments of beef products to the U.S. after President Trump announced a 50% tariff on Brazil last week, the president of Brazilian beef lobby ABIEC, said. Meantime, Texas and federal officials are ramping up screwworm monitoring efforts as outbreaks in Mexico inch closer to the U.S. border.
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 $227.50. The next downside technical objective for the bears is closing prices below solid technical support at $215.00. First resistance is seen at the contract high of $223.825 and then at $225.00. First support is seen at $221.00 and then at $220.00.
The next upside price objective for the feeder bulls is to close August futures prices above technical resistance at $330.00. The next downside price objective for the bears is to close prices below solid technical support at $310.00. First resistance is seen at the contract high of $326.875 and then at $328.00. First support is seen at today’s low of $321.325 and then at this week’s low of $318.70.
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.