Hogs
Price action: August lean hog futures slid $1.15 to $97.05, nearer the daily low after hitting a three-week high early on.
Fundamental analysis: Lean hogs closed lower after trading higher early in the session as premiums to the cash market spurred profit-taking. We have reported that the market has been awaiting a reversal in the cash market. After the past couple days of gains and a bounce in the cash market today, it appeared to be a “buy the rumor, sell the fact” event. Still, futures are seeing modest strength on the daily bar chart as prices maintain an uptrend.
Pork cutout rose 37 cents to $95.86 in morning trade, led by gains in loins, ribs and hams. Movement was relatively light at 121.13 loads. Cutout has relatively stabilized near the $95-mark, which could serve as near-term support. The latest CME lean hog index is down 17 cents to $91.24. Thursday’s projected CME index price is up 24 cents to $91.48, ending the string of recent losses. The national direct five-day rolling average cash hog price quote for today is $97.14.
Technical analysis: August lean hog futures now see a fledgling price uptrend in place on the daily bar chart, to suggest a near-term market bottom is in place. The next upside price objective for the hog bulls is to close June futures prices above solid chart resistance at $100.00. The next downside price objective for the bears is closing prices below solid technical support at this week’s low of $95.425. First resistance is seen at this week’s high of $99.175 and then at $100.00. First support is seen at $97.00 and then at $96.00.
What to do: Get current with feed coverage.
Hedgers: You have 50% of Q2 production hedged with all remaining risk in the cash market.
Feed needs: You have corn-for-feed and soymeal needs covered through July in the cash market. Be prepared to make purchases if value prices continue.
Cattle
Price action: August live cattle fell 60 cents to $241.825, while August feeders fell 45 cents to $364.15.
Fundamental analysis: The cattle futures markets were mixed in midweek trade as live cattle futures posted modest corrective gains while feeders extended lower for the fourth straight session, though sellers were limited by solid technical support.
Live cattle futures continue to face modest selling, extending the series of declines, as feeders faded modestly as traders continue to assess the impact of the return of New World screwworm in the U.S. The USDA Animal and Plant Health and Inspection Service (APHIS) on its NWS website is now reporting 29 total New World screwworm detected cases in the U.S. and all still in Texas and New Mexico. There are 20 active cases, all in Texas.
Regardless, fed cattle supplies remain tight, which should continue to support futures for the foreseeable future, with packers actively working to reduce slaughter due to severely negative margins. Pasture conditions may see some improvement due to rains forecasted for some of the driest areas of Nebraska, Iowa and South Dakota, though recent heat across much of the U.S. has brought stress to a notable portion of the U.S. cattle herd.
USDA at midday today reported very light cash cattle trading taking place at an average price of $256.00. The agency Monday reported cash cattle trading prices last week averaged $259.34, down 29 cents from the week prior. The noon report today showed lower boxed beef prices, with Choice grade down 19 cents at $392.97 and Select grade down $1.10 at $370.58. Movement at midday was 59 loads. The Choice-Select spread is presently plus $22.39.
Technical analysis: Live and feeder cattle futures markets have seen their price uptrends negated. The next upside price objective for the live cattle bulls is to close August futures above resistance at the contract high of $251.65. The next downside technical objective for the bears is closing prices below solid technical support at the June low of $233.975. First resistance is seen at this week’s high of $245.60 and then at $247.50. First support is seen at this week’s low of $240.925 and then at $240.00.
The next upside price objective for the feeder bulls is to close August futures prices above technical resistance at the contract high of $379.45. The next downside price objective for the bears is to close prices below solid technical support at $355.00. First resistance is seen at Tuesday’s high of $367.75 and then at this week’s high of $370.45. First support is seen at this week’s low of $361.575 and then at $360.00.
What to do: You have corn-for-feed and soymeal needs covered through July in the cash market. Be prepared to make additional purchases.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: You have corn-for-feed and soymeal needs covered through July in the cash market. Be prepared to make purchases if value prices continue.