Hogs
Price action: August lean hog futures fell $2.775 to $107.50 and settled nearer session lows.
Fundamental analysis: Lean hog futures saw sharp selling today amid weakness in cash fundamentals. After pushing to fresh multi-year highs mid-week last week, both the CME lean hog index and pork cutout turned lower following the Hogs & Pigs Report. The market also topped right around the annual low in hog slaughter, assuming recent weakness persists. The CME lean hog index is up another 13 cents to $112.02 as of June 26. The preliminary calculation puts the index down 26 cents to $111.76 tomorrow. That marks the first daily decline in a couple months. That weakness spurred selling pressure today, as both July and August futures fell below the index, showing traders anticipation that recent weakness will persist. Pork cutout has faced sustained weakness the past couple of days as well. Cutout fell another 93 cents to $116.53 at midsession today, led by a $16.25 drop in bellies. While prices fell, movement picked up, totaling 211.88 loads, indicating higher demand at lower prices.
Technical analysis: August lean hogs saw heavy selling pressure today. The recent uptrend has stalled out as bears are grasping hold of the technical advantage, bulls need to bounce prices this week in order to keep any momentum. Support comes in at $107.05 then $106.50 on continued selling pressure. Resistance comes in at $108.95 then the psychological $110.00 mark on a reversal higher.
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 57 1/2 cents to $213.875, nearer the daily high and hit a two-week high. August feeder cattle rose $2.775 to $310.675, near the session high and hit a two-week high.
Fundamental analysis: As has been the case in recent months, the cattle futures market bulls have made a strong rebound from last week’s lows to suggest at least a challenge of the record highs scored in early June. The still-large discount that live cattle futures hold to the cash market was also supportive to futures prices today. Better risk appetite in the general marketplace recently has benefitted the cattle market bulls. The recent drop in corn futures prices has also supported the feeder cattle futures.
Cash and beef market fundamentals have deteriorated a bit but remain overall solid. USDA’s official average cash cattle price for last week is down $5.37 at $229.51. We look for steady-lower cash cattle prices again this week, despite packer margins moving into the black as wholesale boxed beef continues to work higher. The noon report today showed Choice-grade boxed beef values rose 10 cents to $396.59, while Select-grade firmed 65 cents to $383.58. Movement at midday was light at 43 loads. The Choice-Select spread is currently $13.01.
Technical analysis: Live and feeder cattle futures bulls have the 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 last week’s low of $207.70. First resistance is seen at $215.00 and then at $216.00. First support is seen at today’s low of $211.25 and then at $210.00.
The next upside price objective for the feeder bulls is to close August futures prices above technical resistance at the contract high of $310.025. The next downside price objective for the bears is to close prices below solid technical support at last week’s low of $300.05. First resistance is seen at today’s high of $311.05 and then at $312.00. First support is seen at $308.00 and then at today’s low of $306.25.
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.