Livestock Analysis | July 18, 2022
Price action: August lean hogs rose $2.30 to $112.125, the contract’s highest closing price since April 28.
Fundamental analysis: Hog futures rose behind continued improvement in cash market fundamentals and a more bullish near-term chart posture. Sharp gains across raw commodity markets also lended support. The CME lean hog index is projected up another 74 cents to $114.89 (as of July 15), near a 13-month high. August futures’ discount to the index has narrowed to about $2.00. The national direct five-day rolling average cash hog price today was quoted at $118.98. Wholesale pork remained firm, with cutout values up $1.01 early today to $123.19, led by gains in bellies. Movement at midday was strong at 189.4 loads. Seasonally, hog slaughter will likely start to rise in the next few weeks. That could put a near-term top in for the cash hog market. However, demand for bacon just ahead of the BLT season should keep a floor under the cash and futures markets.
Technical analysis: Hog futures bulls hold a near-term technical advantage and gained more power today. August futures gapped higher on the daily bar chart, hit an 11-week high and closed near mid-range. The next upside objective for hog bulls is to close August futures above solid chart resistance at $115.00. The next downside objective for bears is closing prices below solid support at last week’s low of $106.45. First resistance is seen at today’s high of $112.725, then $114.00. First support is seen at $110.50, then $110.00.
What to do: Be prepared to extend feed coverage when market bottoms are in place.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You are hand-to-mouth on corn-for-feed and soybean meal needs.
Price action: August live cattle rose 70 cents to $135.625, near the middle of today’s wide range. August feeder cattle rose 32.5 cents to $176.675.
Fundamental analysis: Live cattle futures ended with modest gains behind support from general commodity market strength and signs that beef demand is holding up better than expected even amid near-record retail prices. Choice beef cutout values rose $1.58 early today to $270.49, the highest average since mid-June. But movement by midday was relatively light at 32 loads, indicating that retailers will be selective buyers with most major summer grilling holidays over. Futures’ upside may be limited by price erosion in the cash market. Live steers last week averaged $142.12, down $2.23 from the previous week and the second straight weekly decline from seven-year highs hit earlier this month. Much of last week’s decline was driven by the northern market, where tight supplies had boosted prices recently. Traders await USDA’s monthly Cattle on Feed, biannual Cattle Inventory and monthly Cold Storage reports Friday.
Technical analysis: Bulls hold the short-term technical advantage in live cattle, with August futures continuing to trade above 10-, 20-, and 40-day moving averages. Friday’s low at $134.65 marks initial support and is backed by the 20-day moving average of $134.60 and the 40- and 50-day moving averages, both around $134.20. Initial resistance comes in at today’s high of $136.80, followed by last week’s high of $137.40.
What to do: Be prepared to extend feed coverage when market bottoms are in place.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You are hand-to-mouth on corn-for-feed and soybean meal needs.
