Livestock Analysis | September 25, 2023
Price action: October lean hogs futures closed flat on the day at $81.525 despite a rise in the deferred contracts.
Fundamental analysis: Lean hog futures pivoted around unchanged for most of the session despite a surge in wholesale pork prices. The midsession value for wholesale pork rose $2.96 to $100.22, rising back above the key $100.00 level for the first time since Sept. 19. This was led by a $18.22 rise in belly prices, which continue to be volatile and dominate the direction of cutout as a whole. While wholesale prices surged, the CME lean hog index fell nine cents today to $87.08. The preliminary calculation for tomorrow (as of Sept. 22) puts the index down another 38 cents to $86.70. The spread between the index and October futures widened to over $5.00 after being within $1.00 just last week. The widening spread is likely to keep losses in the futures market at a minimum unless the index turns sharply lower, which would be uncommon at this juncture.
Technical analysis: Last week’s sharp downturn in futures prices negated the recent steep uptrend on the daily bar chart. Supportive fundamentals kept losses at bay today, though the overarching direction of October futures appears to be sideways for the time being, with price in the middle of the sideways range at this point. That leads to a likely continuation of recent volatility in the near future. Support can be expected at today’s low of $81.05 and backed by $80.95; further selling targets the $80.00 level. Bulls are seeking to take out resistance of $82.00, then the $83.00 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 fell 10 cents to $186.975 and nearer the session high. October feeder cattle lost 32 1/2 cents at $258.825 today. Prices closed nearer the session high and hit a two-week low early on.
Fundamental analysis: It was a general risk-off trading day in the marketplace and that limited buying interest in the cattle futures markets. There is a looming U.S. government shutdown possible at the end of this week, and the markets are still feeling the effects of a hawkish FOMC meeting last week. A higher U.S. dollar index that scored a 6.5-month high today was another negative outside market for the cattle futures today.
Last Friday afternoon’s USDA cattle-on-feed report was just a bit bearish from market expectations and showed 11.094 million head in large feedlots as of Sept. 1, down 248,000 head (2.2%) from a year ago. Placements fell 5.1%, while marketings dropped 6.0% from year-ago levels during August. Still, the recent monthly cattle-on-feed reports have seen a bullish trend of lower cattle numbers.
Last week’s average cash cattle trading price was $184.73, up 69 cents. We expect cash prices to be firmer again this week. The noon report showed wholesale beef cutout values mixed, with Choice down $1.93 to $301.40, while Select rose $1.19 to $281.62. Movement at midday was light at 36 loads. The Choice-Select spread narrowed to $19.78.
Technical analysis: The live and feeder cattle futures bulls still have the solid overall near-term technical advantage. Live cattle prices are in a five-week-old uptrend on the daily bar chart. The next upside price objective for the bulls is to close October futures above solid resistance at $190.00. The next downside technical objective for the bears is closing prices below solid technical support at $182.00. First resistance is seen at the contract high of $187.45 and then at $189.00. First support is seen at last week’s low of $184.65 and then at $183.00.
Feeder cattle futures bulls are fading a bit. Prices are still in a five-week-old uptrend on the daily bar chart but just barely. The next upside price objective for the feeder bulls is to close October futures prices above technical resistance at the contract high of $264.675. The next downside price objective for the bears is to close prices below solid technical support at the September low of $252.85. First resistance is seen at today’s high of $259.55 and then at $261.00. First support is seen at today’s low of $256.65 and then at $255.00.
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.
