Livestock analysis | September 19, 2023
Price action: The nearby contracts led hog futures higher Tuesday, with October surging $1.60 to $84.85.
Fundamental analysis: The latest hog numbers don’t seem terribly supportive, but that didn’t stop CME futures from rising substantially. For example, despite routinely posting modest advances lately, last Friday’s preliminary figure fell 12 cents to $86.81 (the official figure seemingly wasn’t published today), Monday’s preliminary calculation has the index setting back another 23 cents to $86.58. Also, last week’s slaughter total is estimated at 2.531 million head, up 1.8% above year-ago levels, once again suggesting summer/fall hog supplies will easily exceed the unchanged levels implied by the June USDA Hogs & Pigs report.
Conversely, after having fallen back below the $100.00 level last week, pork cutout climbed back above that level yesterday and added another 30 cents to $101.26 at noon today. Thus, while hog and pork supplies are seemingly rising both seasonally and cyclically, consumer demand remains robust in the wake of sizeable spring price reductions to consumers. The fact that the nearby October contract ended today about $1.75 under the latest cash equivalent prices is likely encouraging support as well.
Technical analysis: The bears’ inability to force downside followthrough to Monday’s decline kept the technical advantage on the side of the bulls today. Bears proved unable to close the nearby October contract significantly below its 10-day moving average near $83.26 yesterday, but that point seemed to serve as a springboard to today’s advance, which marks it as initial support. That’s backed by the intersection of its 20- and 40-day moving averages near $82.35. A close below that point would have bears targeting the psychological $80.00 level, then the contract’s August low of $77.75. Today’s high marks initial resistance at $85.225. That’s closely backed by last Wednesday’s high of $85.60, then the August 1 high of $86.75. A breakout above that point would have bulls targeting the $90.00 level.
What to do: Get current with feed advice. Carry all production risk in the cash market for now.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all corn-for-feed and soymeal needs covered in the cash market through September.
Price action: October live cattle futures fell 65 cents today before closing at $185.675. October feeder futures led the complex lower, falling $1.60 to $259.35.
Fundamental analysis: Cattle futures faded early morning gains that brought the October future to a fresh all-time high, ultimately closing lower on the day. As expected, cash trade has been slow to develop thus far this week. Packers being short bought on slaughter needs could spark earlier than normal trading, but volume is likely to remain minimal until the latter half of the week. Last week’s jump in the cash average has given producers confidence after the prior five straight weeks of week over week declines. Packers will not be quick to pay up for cattle though, as wholesale prices continue to fall despite surging cash and futures prices. Choice cutout fell $1.50 at midsession to $303.82, while Select rose 15 cents to $283.56. The $300.00 level was key in the pullback in Choice cutout prices in late July/early August, which will remain key as cutout returns to that level.
Feeder cattle have struggled to maintain upside following Friday’s contract high, despite pressure in feed markets over the same time. How feeders react the remainder of the week will be important, as volatility has recently ramped up.
Technical analysis: October live cattle futures spiked above the prior all-time high this morning, marking a new record at $187.45. Bulls still retain full control of the technical advantage, though the steep uptrend on the daily bar chart leaves room for profit-taking. Bulls are seeking to hold support at $185.20, then $184.55, else additional selling pressure is likely to test the $182.00 level. Bears are seeking to hold all-time high resistance at $187.45, else a grind higher is likely to target the $190.00 level.
October feeder futures have seen relative weakness the past couple of days. Bulls are seeking to hold $257.95 support, which is backed by $257.00 support. Bulls retain full control of the technical advantage as an uptrend remains in place on the daily bar chart. Further selling would target stiff support at $255.00. Bears are seeking to hold $264.675 resistance, though a trip to the psychological $270.00 level seems likely.
What to do: Get current with feed advice. Carry all production risk in the cash market for now but be prepared for some hedge coverage as we have demand concerns.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all corn-for-feed and soymeal needs covered in the cash market through September.
