Livestock Analysis | June 24, 2021
Price action: July lean hogs fell the expanded $4.50 limit, settling at $100.025 per hundredweight, while August dropped $2.025 to $98.70, the ninth decline in the past 10 days and the lowest close in over two months. Hog futures will trade with the expanded $4.50 limit tomorrow.
Today’s USDA Quarterly Hogs & Pigs Report is expected to show the total U.S. herd as of June 1 was about 2.3% smaller than the same date a year earlier, based on a Reuters survey of analysts. The number of pigs kept for breeding as of June 1 is expected to be down about 1.1% from a year earlier.
USDA today reported net pork sales of 28,600 MT for the week ended June 17, down 2% from the previous week and down 4% from the prior four-week average. For the marketing year to date, U.S. pork exports totaled 936,800 MT, down 1.8% from the same period a year earlier. Accumulated exports to China, at 277,400 MT, were down 29% from this point a year ago.
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.
Price action: August live cattle closed down $0.25 at $122.625 today and nearer the session high. August feeder cattle closed up $1.45 at $157.15 today and also nearer the session high.
Fundamental analysis: Live cattle futures today saw some mild profit-taking pressure and chart consolidation ahead of Friday afternoon’s monthly USDA Cattle on Feed report. Traders were also awaiting further direction from the cash cattle market. There was some additional cash cattle trade from $125 to $126 in Iowa and Nebraska Wednesday, with Texas seeing a few sales at $122.
The noon beef report Thursday showed Choice cutout value down $4.19 and Select grade up $1.00 on movement of 70 loads. Beef cutout values have eroded recently due in part to reduced grocer buying for the post-July 4 period. Today’s cattle slaughter is estimated at 119,000 compared to 120,000 last Thursday and 118,000 one year ago.
Feeder cattle futures were boosted today on this week’s eroding corn futures prices. Feeder futures traders will continue to look to the corn futures market for direction.
Thursday morning’s USDA’s weekly export sales report showed U.S. beef sales of 16,900 MT for the week ended June 17, up 31% from the previous week but down 3% from the prior four-week average. For the marketing year to date, U.S. beef exports totaled 428,000 MMT, up 7% from 367,200 MT during the same period a year earlier. Accumulated exports to China, at 63,000 MT, were up 13-fold compared to 4,800 MT at this point a year ago.
Friday afternoon’s USDA Cattle on Feed report is expected to show about 11.73 million head of cattle on feed as of June 1, a 0.5% increase from the same date a year earlier, based on the average analyst estimate. Young cattle placed in feedlots for fattening in May totaled 1.958 million head, based on the average estimate, down 4.6% from a year earlier.
Technical analysis: Live and feeder cattle futures bulls have the solid overall near-term technical advantage, with next upside objectives including closing August prices above solid resistance at the contract high of $125.775. The next downside technical objective for the bears is closing prices below solid technical support at $120.00. First resistance is seen at $124.00 and then at $125.00. First support is seen at today’s low of $121.20 and then at this week’s low of $120.50.
The next upside price objective for the feeder market bulls is to close in August prices above technical resistance at the contract high of $162.40. The next downside price objective for the bears is to close prices below solid technical support at $152.50. First resistance is seen at the June high of $160.15 and then at $162.40. First support is seen at $155.00 and then at this week’s low of $153.60.
What to do: Get current with feed advice.
