Livestock Analysis | September 13, 2021

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Hogs

Price action: October lean hogs fell $1.675 to $80.775 per hundredweight, the lowest closing price since $80.725 on March 4.

Fundamental analysis: Falling wholesale pork and cash hog prices, bearish charts and a plunging cattle futures market all weighed on the lean hog futures market today. About the only thing working in favor of the hog market bulls early this week is that futures prices are now well oversold on a short-term basis and due for a corrective bounce soon.

Pork carcass cutout values fell another $2.09 to an average of $101.56, with loins and ribs leading declines, according to a midday USDA report. Cutout values have fallen to the lowest levels since mid-March. Cash hog prices on a national direct basis today were down $2.25 at $86.20, based on the five-day rolling average. The latest CME lean hog index price is down 23 cents at $97.73, the lowest since last March but still around $16 above the October futures contract.

Hog slaughter during the holiday-shortened week last week was estimated at 2.27 million head, down 5% from 2.39 million the previous week. Today’s slaughter was estimated at 471,000 head compared to 6,000 last Monday (a holiday) and 487,000 head one year ago at this time.

Technical analysis: The lean hog bears have the firm overall near-term technical advantage and gained more power today. The next upside price objective for the hog bulls is to close October prices above solid chart resistance at $85.00. The next downside price objective for the bears is closing prices below solid technical support at $77.50. First resistance is seen at today’s high of $82.85 and then at $84.00. First support is seen at $80.00 and then at $79.00.

What to do: Get current with feed advice. Be prepared to add fourth quarter hog hedges on a price recovery.

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.

 

Cattle

Price action: Live cattle futures finished $1.075 to $1.60 lower through the April contract. October live cattle fell $1.15 to $122.275 per hundredweight, the lowest settlement since early May. Feeder cattle fell $1.975 to $2.275 from September through January contracts.

Fundamental analysis: Cattle futures faced more liquidation pressure today as funds continued to dump long positions. Fundamental pressure came from news of a fire that started late Sunday at the JBS plant in Grand Island, Nebraska. That gave traders a reason to liquidate more long positions. While the market worked well off its intra-day lows, downside momentum is building.

Last week’ cash cattle trade averaged $124.79, down 82 cents from the previous week. With boxed beef prices continuing to slide, traders expect cash prices to soften again, though active trade isn’t likely until later in the week.

Feeder cattle futures fell despite weakness in the corn market today. Initial results from the Oklahoma City feeder cattle auction noted a lower undertone on prices amid moderate demand, though there weren’t enough head traded for a true test.

Technical analysis: October live cattle gapped sharply lower this morning. While the contract rebounded to fill the gap, bears have the strong short-term upper hand. Today’s low at $120.85 is key near-term support as violation of that level would likely spark a test of key support at the June low of $119.825. The contract is nearing oversold territory on the 14-day Relative Strength Index. Old support at $124.05 is near-term resistance.

What to do: Get current with feed advice. Futures are signaling a short-term top is in place. We may add hedges for fed cattle soon.

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.

 

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