Livestock Analysis | September 20, 2021
Price action: October lean hogs fell 75 cents to $84.975 per hundredweight, near the middle of today’s range, while the December contract fell 82.5 cents to $74.225.
Fundamental analysis: The hog futures market was pressured in part by general “risk-off” attitudes, as global stock markets sold off and the U.S. dollar index neared a one-month high on concern over potential financial contagion from China. The S&P 500 index was down nearly 3% late today. If the stock markets continue to slide this week, gains in lean hog futures will likely be limited.
Bearish cash hog market fundamentals also kept buyers in hog futures on the sidelines. National direct carcass values early today fell $2.58 to $78.90, while the latest CME lean hog index price fell 19 cents to $94.26, the lowest since late March but still around $9.00 above October futures at present.
Hog market bulls are hoping the wholesale pork market has put in a seasonal low. Pork carcass cutout values early today rose $2.06 to an average of $107.47, led by gains in bellies. Movement by midday was 131.37 loads. Today’s hog slaughter is estimated at 478,000 head compared to 471,000 last Monday and 479,000 one year ago at this time. Traders are looking ahead to the Sept. 24 USDA quarterly Hogs and Pigs Report, which is expected to show further shrinkage of the U.S. hog herd.
Technical analysis: Lean hog bears have the slight overall near-term technical advantage, but good gains seen recently suggest a near-term market bottom is in place. The next upside price objective for the hog bulls is to close October prices above solid chart resistance at $88.00. The next downside price objective for the bears is closing prices below solid technical support at the September low of $79.775. First resistance is seen at last week’s high of $86.125 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 narrowly mixed with a slight downside bias. December live cattle rose 55 cents to $128.075 per hundredweight. Feeder cattle futures ended with slight gains.
Fundamental analysis: The cattle market held up relatively well considering heavy pressure on the stock market today amid building U.S. and global economic concerns. Typically, the cattle market is rather responsive when the stock market leads a broad-based selloff in asset-based markets. While today’s performance was encouraging for bulls, cattle will struggle to stave off pressure if outside markets continue today’s selloff.
Last week’s average cash cattle price was $123.88, down 91 cents from the previous week. As a result, traders expect steady to weaker prices this week, though strong cash opinions won’t likely be formed until around midweek.
The wholesale beef market showed potential signs prices may be working on a low with gains of $1.20 in Choice and 56 cents in Select boxes this morning. But a morning of trade is far from enough for us to say a low is in place. Traders likely want to see signs the boxed beef market has bottomed before they return as active buyers in futures.
Technical analysis: October live cattle gapped lower this morning but rebounded to fill the gap. Near-term support is at today’s low of $121.80 and last week’s low at $120.85. Near-term resistance is the 10-day moving average around $123.375 and the 200-day average at $123.44. Clearing those levels would suggest a short-term low is in place.
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.
