Livestock Analysis | September 14, 2021
Price action: October lean hog futures settled 40 cents lower at $80.375 per hundredweight, the contract’s lowest close since March 5.
Fundamental analysis: Bulls tried to reverse the recent downtrend in hogs today, but bears were able to again force a lower close. Pessimism about red meat demand this fall amid the Covid-19 resurgence appeared to weigh on hog futures, even as pork cutout values surged $8.80 earlier today to $108.95. Traders likely anticipate an afternoon reversal of that increase, especially with beef cutout values continuing to decline. The next CME lean hog index is expected to fall to $96.75, the lowest since late March. Market bulls continue to wait for the hog market’s usual seasonal strength to emerge. However, the October futures contract’s persistent discount to the index suggests a preponderance of bearish sentiment over the near-term.
Technical analysis: October futures’ drop to six-month lows indicates market bears retain a technical advantage. However, the market is near 30 on the relative strength index, indicating oversold conditions. Moreover, October fell as low as $79.775 before bouncing back, suggesting downward momentum has waned and a potential reversal may be developing. Expect significant resistance in the $80.75 area, around $83.30, then at $85.00. A decisive drop below $80.00 would likely have bears targeting support around $78.50.
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.
Price action: October live cattle futures rose $1.85 to $124.125 per hundredweight, up from yesterday’s plunge to four-month lows and the highest settlement since Sept. 3. October feeder cattle rose $2.70 to $158.15.
Fundamental analysis: Cattle futures posted a technical rebound amid beliefs the market was oversold in the wake of a recent selloff. While cash fundamentals remain soft, a relatively small decline in wholesale beef prices earlier today may have stirred beliefs the market may be stabilizing after an extended slide.
Choice cutout values early today fell 74 cents to an average of $325.19, USDA reported. If the today’s final cutout price remains lower, it would mark the 12th consecutive daily decline and the lowest price since Aug. 13. Slaughter-ready steers in five top feedlot areas last week averaged $124.79, down from $125.61 the previous week but up from $101.21 for the same week a year earlier.
Cash trading in the Southern Plains and Nebraska was at a standstill early this week, USDA said. In the western Corn Belt, cash trading was mostly inactive on light demand, with insufficient purchases to establish a market trend.
A JBS beef plant in Grand Island, Nebraska, that was partially idled by a fire over the weekend resumed processing today. Meatpackers slaughtered an estimated 234,000 head of cattle so far this week, down 2.5% from the same period a year earlier, USDA reported.
Technical analysis: Market bears have a firm near-term technical advantage after October live cattle broke below key moving averages during a three-week tumble. For market bears, downside objectives include closing October below support at the June low of $119.92. Other chart levels to watch include yesterday’s low at $120.85 and last week’s high at $125.70.
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.
