Livestock Analysis | September 2, 2021
Price action: October lean hogs fell 30 cents to $89.85 per hundredweight, down from $90.725 at the end of last week. December futures fell 15 cents to $82.325.
Fundamental analysis: Lean hog futures saw some mild profit-taking pressure from the shorter-term futures traders today, but cash market fundamentals have improved a bit just recently. USDA today reported net U.S. pork sales of 33,500 metric tons (MT), up 39% from the previous week and up 38% from the prior four-week average. Pork carcass cutout values rose $2.69 to $107.48 at noon today, after falling yesterday to the lowest daily price since late March. Hams were the lead gainers on movement of 144.20 loads.
The hog market has a seasonal tendency to rise during September and early October. Strong meat demand, tight stocks and USDA’s forecast for a 3% annual drop in hog supplies should keep cash and futures prices trading sideways, if not sideways to higher, in the near term. However, the latest CME Lean Hog index price was reported down 94 cents at $102.67, the lowest since April. The index has dropped around $10 from its August 4 high of $112.48.
Meatpackers slaughtered an estimated 1.907 million head of hogs so far this week, up from 1.86 million head over the same period last week and up from 1.9 million for the comparable period a year ago, USDA reported.
Technical analysis: Lean hog bulls have the slight overall near-term technical advantage as prices have been trending up for three weeks. However, they need to show fresh power soon to keep their chart edge. The next upside price objective for the hog bulls is to close October futures above solid chart resistance at the July high of $94.05. The next downside price objective for the bears is closing October below solid technical support at the August low of $83.325. First resistance is seen at this week’s high of $91.425 and then at $92.00. First support is seen at this week’s low of $88.375 and then at $87.00.
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.
Price action: October live cattle dropped $1.525 to $126.05 per hundredweight, the contract’s lowest settlement since $125.25 on July 21. October feeder cattle fell $3 to $165.05, the lowest close since Aug. 17.
Fundamental analysis: Live cattle futures ended at six-week lows as wholesale beef prices extended a recent slide and eroding charts spurred technical selling. Choice cutout values fell 53 cents early today to $337.92, the lowest in over two weeks, while cash trading in top U.S. feedlot areas remains sluggish. Weaker technicals and cash fundamentals overshadowed signs of stronger export demand. Early today, USDA reported net U.S. beef sales of 15,600 metric tons (MT) for the week ending Aug. 26, up 49% from the previous week and up 24% from the prior four-week average. Meatpackers have stepped up slaughter this week as profit margins remained robust. USDA reported an estimated 476,000 head of cattle slaughtered the first four days this week, up 13,000 from the same period a week earlier and up 1,000 from the same period a year earlier.
Technical analysis: Bullishness is quickly fading amid growing beliefs the cattle and beef markets have established near-term tops. October live cattle settled almost exactly on the 100-day moving average, with the 200-day currently around $123. For market bears, downside technical objectives include closing October below solid technical support at $125.00. Market bulls face solid resistance at the contract high of $132.85 posted Aug. 24.
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.
