Livestock Analysis | September 16, 2021
Price action: October lean hogs closed up $3.20 at $85.475 per hundredweight. Prices closed nearer the session high today on short covering and bargain hunting.
Fundamental analysis: The strong gains in lean hog futures the past two sessions suggest the market may be establishing a near-term bottom after sinking to six-month lows earlier this week. Wholesale pork prices extended a recent upturn. Pork cutout value at noon today rose another $2.40 at $106.58, led by gains in loins and bellies. Movement was 154.66 loads at noon. The national direct average cash hog price was down $1.91 at $83.72 today. The latest CME lean hog index is down $1.42 to $95.35, the lowest since March. October futures remain at around a $10 discount to the Lean Hog Index. Hog slaughter so far this week totaled an estimated 1.88 million head compared to 1.43 million head for the same period last week and 1.92 million head for the corresponding period in 2020, USDA reported.
Also today, USDA reported net weekly U.S. pork sales totaling 25,300 metric tons (MT), down 25% from the previous week and down 9% from the prior four-week average.
Technical analysis: The lean hog bears still have the slight overall near-term technical advantage, but good gains seen the past two trading sessions suggest a near-term market bottom is in place. A technically bullish weekly high close tomorrow could solidify a potential bottom, portending sideways or sideways-to-higher action in the coming weeks.
The next upside price objective for the hog bulls is to close October prices above solid chart resistance at $90.00. The next downside price objective for bears is closing prices below solid technical support at this week’s low of $79.775. First resistance is seen at today’s high of $85.975 and then at $87.50. First support is seen at $84.00 and then at $83.325.
What to do: Make sure you’re current on 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 75% for September and 25% for the fourth quarter. You should be hand-to-mouth on corn for feed needs.
Price action: Live cattle futures finished 50 to 87 1/2 cents lower through the February contract, with lesser losses in far-deferred months. October cattle fell 57.5 cents to $123.60 per hundredweight. Feeder cattle ended widely mixed with prices ranging from 40 cents lower to $1.15 higher through the January contract.
Fundamental analysis: After strong corrective gains on Tuesday, cattle traders have tapped the brakes as this week’s cash cattle trade has trended steady to slightly lower compared with last week. The bounce from Monday’s spike low suggests traders wanted to hit the pause button, but it’s going to take a bullish spark to entice sustained buying.
Weekly beef export sales of 15,300 MT were up 23% from the previous week and 24% from the four-week average. But weekly shipments were down 11% compared with both week-ago and the four-week average. China continues to show up as a buyer and destination for U.S. beef.
Wholesale beef prices are showing no signs of bottoming despite a prolonged slide. Choice boxed beef dropped another $1.58 early today while Select slumped $2.09, as packers reduce prices to move product. Only 75 loads of beef changed hands this morning. The boxed beef market likely needs to bottom before buyers actively return to futures.
Technical analysis: October live cattle futures have spiked the 10-day moving average the past three days but have failed to find sustained buying above that level. The contract hasn’t closed above the 10-day average, which was near $123.875 today, since Aug. 26. A close above that short-term moving average would likely be seen as a sign the market has put in a short-term bottom. Monday’s spike low at $120.85 is near-term support, followed by the more critical June low at $119.825.
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 75% for September and 25% for the fourth quarter. You should be hand-to-mouth on corn for feed needs.
