Livestock Analysis | July 26, 2021
Price action: August lean hogs rose 5 cents to $107.40 per hundredweight after earlier reaching a five-week high, while October futures rose 47.5 cents to $93.10. Traders will be watching to see if recent slightly upticks are sustained this week.
Fundamental analysis: Hog futures extended last week’s gains that were driven by stronger wholesale pork markets, tight pork supplies and stronger technical patterns. Carcasses on national direct markets traded between $100 and $110 early today, compared to a five-day rolling average at $105.55, USDA reports showed. At the end of last week, direct market carcasses traded at $104.59, down 2.5% from a week earlier.
Last week’s slaughter was an estimated 2.33 million head, up 2.3% from the previous week but down 9.5% from the same week a year earlier.
Technical analysis: August lean hogs rose as high as $107.725, the contract’s highest price since $109.625 on June 18. Chart levels to watch include last week’s high at $107.55 and the 40-day moving average slightly below $108. A push above resistance levels could have August poised to fill a $1.275 price gap created by a steep downturn in mid-June.
What to do: Get current with feed advice. Be prepared to add hog hedges when the rebound in October futures stalls.
Hedgers: You currently have all risk in the cash market.
Feed needs: Cash coverage for meal stands at 100% for July, 100% for August, 75% for September and 25% for the fourth quarter. Cash coverage for corn needs stands at 100% for July, 100% for August and 50% for September.
Price action: Live cattle futures finished $1.075 to $2.05 higher through the February contract. Feeder cattle posted gains of $1.15 to $2.30 through the January contract.
Fundamental analysis: Last Friday’s cattle reports were supportive for live and feeder cattle futures today, especially the Cattle Inventory Report. It showed the U.S. beef herd contracted more than anticipated. The beef cow inventory dropped 2% versus year-ago, while the steer and heifer inventories signal the available feeder cattle supply outside of feedlots is smaller than last year. But with the report data factored into prices, the challenge will be for bulls to find follow-through buying.
That could largely depend on cash cattle expectations for the week. Last week’s average cash price of $120.77 was down $2.05 from the previous week. August live cattle finished today $2.68 above last week’s average cash price, so traders will likely want to see signs of cash strength before they push futures much higher.
Cash feeder cattle prices were $2 to $5 higher for steers and $4 to $6 higher for heifers this morning. Demand was reportedly moderate to good. The Mitchell Livestock Auction in South Dakota reported firmer prices for heavier steers and most heifers.
Technical analysis: August feeder cattle rallied to a new high of $163.15, which was the highest level on the front-month continuation chart since March 2016. A monthly close above $161.50 would be a bullish breakout from a four-plus year sideways range.
August live cattle pushed above the downtrend drawn off the June and July highs. Those highs at $124.325 (July 1 high) and $125.775 (contract high posted in June) are near-term resistance. Support is in the $121.50 to $119.00 range.
What to do: Get current with feed advice. Be prepared to add hedges on a price recovery.
Hedgers: Carry all risk in the cash market for now.
Feed needs: Cash coverage for meal stands at 100% for July, 100% for August, 75% for September and 25% for the fourth quarter. Cash coverage for corn needs stands at 100% for July, 100% for August and 50% for September.
