Hogs
Price action: July lean hog futures climbed 67.5 cents to $113.45 and settled nearer session highs.
Fundamental analysis: Hog futures saw modest gains today, the fifth consecutive day of contract highs, as prices continue to march higher on the daily bar chart, supported by gains in cash fundamentals. Gains in the CME lean hog index slowed somewhat towards the end of last week. A slow market from the federal holiday could be one factor weighing on the index, but it is something to be mindful of as the index is at the highest mark in nearly three years. Slowing strength in the index could lead to profit-taking in futures, which continue to trade at overbought levels. The CME lean hog index is up another 81 cents to $108.78 as of June 19. The preliminary calculation puts the index up another 77 cents to $109.55 for tomorrow’s quote. Meanwhile, strength in pork cutout likely bled over to strength in the futures market today. Cutout build on Friday’s big push higher, rising another 75 cents to $122.89. Strength in hams and bellies led cutout higher. Traders are likely to shore up positions ahead of this week’s Hogs & Pigs Report, which could lead to profit-taking given the current length of the market.
Technical analysis: July lean hog futures continue to exhibit robust strength, leading the complex higher. Bulls continue to maintain full control of the technical advantage. Resistance comes in at today’s contract high of $113.70, which sees little reinforcement until the psychological $115.00 mark. Support comes in at $112.775 then the 10-day moving average at $110.55 on a reversal lower.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
Feed needs: You have all of your soymeal and corn-for-feed needs covered in the cash market through July. You also have half of your soymeal needs for August, September and October covered in cash.
Cattle
Price action: August live cattle fell 45 cents to $209.375, near mid-range and hit a three-week low early on. August feeder cattle rose 35 cents to $302.80, nearer the session high and hit a nearly three-week low in early trading.
Fundamental analysis: The live cattle futures markets fell victim to some mild profit-taking pressure and risk-off-based selling amid the heightened tensions in the Middle East following the weekend U.S. strikes against Iran nuclear facilities. The significant discounts live cattle futures hold to the cash cattle market did limit the downside in futures today.
Cash cattle and beef market fundamentals are starting to deteriorate a bit. Cash cattle trading last week averaged $234.88, which is down $4.03 from the week prior and marks the first decline in the weekly average cash price since early April. We look for steady-weaker cash cattle prices when trading commences in earnest later this week. The noon report today showed Choice-grade boxed beef fell $1.63 to $388.87, while Select-grade rose $3.90 to $380.55. Movement at midday was 53 loads. The Choice-Select spread narrowed to $8.02.
USDA last Friday afternoon estimated there were 11.442 million head of cattle in large U.S. feedlots (1,000-plus head) as of June 1, down 141,000 head (1.2%) from year-ago. May placements declined 7.8% and marketings fell 10.1% from year-ago levels, with both categories slightly lower than the average pre-report estimates.
Technical analysis: Live and feeder cattle futures bulls still have the overall near-term technical advantage, but have faded recently. 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 $200.00. First resistance is seen at today’s high of $211.25 and then at $213.00. First support is seen at today’s low of $208.10 and then at $207.00.
The next upside price objective for the feeder bulls is to close August futures prices above technical resistance at the contract high of $314.20. The next downside price objective for the bears is to close prices below solid technical support at the May low of $293.05. First resistance is seen at $305.00 and then at $307.00. First support is seen at $300.00 and then at $297.50.
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: You have all of your soymeal and corn-for-feed needs covered in the cash market through July. You also have half of your soymeal needs for August, September and October covered in cash.