Livestock Analysis | July 7, 2022
Price action: August lean hog futures rose 30 cents at $109.50, the contract’s highest closing price since June 21.
Fundamental analysis: Nearby hog futures extended sharp gains the previous two sessions and ended at the highest levels in over two weeks as technical strength and easing concern over pork demand outweighed weakness in cash benchmarks. The CME lean hog index fell 65 cents to $109.93 (as of July 5), the fifth straight daily decline. August futures ended today at a discount of 43 cents to the index, down from a gap of nearly $8 at the end of last week and an indication futures traders expect a stronger cash tone this month, considering hog supplies have shrunk seasonally to lows for the year. The five-day rolling average national direct cash hog price today was quoted at $118.46. Wholesale market strength also supported futures. Pork cutout values early today rose $1.61 to $113.11, led by strength in bellies. Movement was decent at 174 loads.
Technical analysis: August lean hogs posted a potentially bullish upside breakout from a recent choppy trading range. However, today’s low-range close suggests the move may have been a “false breakout.” Good follow-through buying on Friday would confirm the bullish breakout. Bulls have gained the overall near-term technical advantage with this week’s price gains. The next upside objective for bulls is to close August prices above solid resistance at $115.00. The next downside objective for bears is closing prices below solid support at $105.00. First resistance is seen at today’s high of $111.75, then $113.00. First support is seen at $108.00, then at Wednesday’s low of $107.02.
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 5 cents to $134.55, near the bottom of the day’s range after initially rising to a two-week high at $135.725. August feeder cattle fell $1.025 to $176.05.
Fundamental analysis: Live cattle futures rose a second consecutive day, though August futures trimmed much of the contract’s early advance to end with only a modest gain. Prices were supported by signs of easing recession concerns, as strength in U.S. stocks and commodities such as crude oil provided a firmer tone to agricultural commodities. Expectations for steady to firmer cash cattle prices and continued strength in wholesale beef also underpinned futures. Choice beef cutout values gained 26 cents early today to $268.31 on firm midday movement of 79 loads. The premium Choice holds to Select cutouts widened to over $25, the highest since early October and an indication of snug supplies for market-ready animals. Feeder cattle were pressured by renewed strength in corn futures.
Technical analysis: Live cattle bears retain a slight near-term technical advantage but bulls have gained some strength this week, though prices continue trading in a sideways, choppy pattern that’s persisted since late June. August futures closed above the 40- and 50-day moving averages at around $133.80 and $134.35, respectively. Today’s high at $135.725 marks initial resistance, followed by the 100-day moving average at slightly above $136.00. Initial support comes in around the 10-day moving average around $133.475 and this week’s low at $132.675.
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.
