Livestock Analysis | June 10, 2021
Price action: August lean hogs closed down $0.05 at $118.70 today. Prices closed near mid-range today on a pause after hitting a contract high on Monday.
Fundamental analysis: A surging cash hog market is keeping futures prices at their second-highest level in the more-than-50-year history of hog futures trading. Cash hogs on a national direct basis rose a solid $5.05 at $115.06 today, which is a good sign given that seasonally hog supplies should be starting to rise. Average hog weights in the Iowa/southern Minnesota/South Dakota market rose 1.3 lbs. in the week ending June 5 to 284.4 lbs. The pork cutout value rose 59 cents at noon Thursday, led by gains in bellies. Movement was 154.63 loads. Today’s hog slaughter was estimated at 482,000 today, compared to 470,000 last Thursday and 455,000 one year ago at this time.
USDA Thursday morning reported U.S. pork export sales of 19,700 MT for the week ending June 3--a 24% decline from the prior four-week average. China was the lead buyer, followed by Mexico. Pork exports of 27,500 MT registered a marketing-year low. USDA also today lowered U.S. pork production in its June supply and demand report, due to higher expected hog slaughter more than offsetting lower carcass weights.
Chinese pork prices have been falling due to more cases of African swine fever prompting higher slaughter numbers. China has also been rebuilding its hog herd.
Technical analysis: The hog futures bulls have the solid overall near-term technical advantage. There are no early clues that a market top is close at hand. Six-month-old uptrends remain in place on the daily bar charts. The next upside price objective for the hog bulls is to close August prices above solid chart $125.00. The next downside price objective for the bears is closing prices below solid technical support at $115.00. First resistance is seen at the contract high of $120.55 and then at $121.00. First support is seen at this week’s low of $116.60 and then at $115.00.
What to do: Get current with feed advice. Be prepared to extend corn coverage on a drop to the $6.30 area in July futures and $5.30 in December futures. Be prepared to add to third quarter hog hedges and establish fourth-quarter coverage.
Hedgers: You should have 25% of third-quarter production hedged in July hog futures at $95.375.
Feed needs: You should have all soybean meal needs covered in the cash market through July, along with 50% for August and 25% for September. You have all corn-for-feed needs covered in the cash market through June, along with 25% of third-quarter needs.
Price action: August live cattle settled 27.5 cents higher at $118.55, while August feeder cattle erased early declines to end 12.5 cents higher at $148.40.
Fundamental analysis: Cattle futures were largely subdued in a trading range before eking out modest gains by the close. Strong beef prices continue to underpin futures. Choice beef cutout values fell 47 cents this morning but remain strong at $338.18. While cutout values continue to ease from a 12-month high last week, the market is still up about 25% for the five-year average for this time of year. On cash markets, live steers averaged around $119.87 this morning, close to last week’s average of $119.92.
Net beef export sales for the week ended June 3 totaled 16,100 MT, up 28% from the previous week, but down 17% from the prior four-week average. Weekly exports were a new high for the year at 21,100 MT. For the marketing year to date, accumulated beef exports, at 392,002 MT, were up 15% from the same period a year earlier. Exports to China so far this year totaled 55,900 MT, at 13-fold increase over 4,200 MT a year earlier.
Cattle futures’ sideways trading recently reflects competing bullish and bearish forces. Exports have been strong and wholesale beef values remain historically high, but recent slippage in beef prices indicates restaurants and retailers have mostly satisfied their near-term needs, and seasonal summer doldrums loom. Also, there are indications feedlot operators are behind on cattle marketings, leaving them limited leverage with packers.
Feeder cattle traders will keep a close watch on rising corn prices amid growing concern over extreme heat and dryness in the Midwest.
Technical analysis: August live cattle futures rose to a high for the week at $118.90 but remain within the range from the past couple weeks. Resistance extends from the May 25 high of $121.225 to $121,62, with support around the May 22 low of $115.925, plus pivotal support at the June 1 low of $114.625. August feeder cattle fell as low as $146.75, the lowest intraday price since $145.10 on June 1, before finding support, and are in a short-term downtrend.
What to do: Get current with feed advice. Be prepared to extend corn coverage on a drop to the $6.30 area in July futures and $5.30 in December futures.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all soybean meal needs covered in the cash market through July, along with 50% for August and 25% for September. You have all corn-for-feed needs covered in the cash market through June, along with 25% of third-quarter needs.
