Livestock Analysis | September 8, 2021
Price action: October lean hogs fell 72.5 cents to $87.375 per hundredweight, the contract’s lowest closing price since $86.975 on Aug. 24. December hogs fell 22.5 cents to $80.55.
Fundamental analysis: Futures settled at a two-week low as a combination of recent wholesale pork market weakness and expectations for rising supplies kept buyers at bay. A sharp jump in cutout values early today may provide some encouragement for market bulls, but the wholesale market has made several such morning “head fakes” in recent weeks.
Average carcass cutout values rose $6.77 early today to an average of $112.33, led by a jump of over $35 in primal hams, USDA reported. But cutouts are just a day removed from a decline to the lowest daily price since March 22. The latest CME lean hog index fell 76 cents to $99.30, the lowest since $98.50 March 30, and may continue dropping, given recent declines in national direct carcass prices reported by USDA. October futures’ discount to the index remains wide (nearly $12), suggesting excess market pessimism, but futures have displayed little inclination lately for sustained moves higher.
Technical analysis: Hog futures’ chart posture took a further turn for the bearish with today’s close, which pushed October futures below most moving averages and within about $4 of the 200-day moving average around $83.00. Chart levels to watch include the Aug. 24 intraday low, $86.05, the lowest price since mid-August, and $91.425, a three-week high reached Aug. 30. For market bears, downside price objectives include closing October below solid technical support at $85.00. For bulls, upside objectives include closing October above solid chart resistance at $92.50.
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 fell 65 cents to $123.10 per hundredweight, hitting another three-month low. October feeder cattle fell 77.5 cents to $159.275, reaching a six-week low.
Fundamental analysis: Technical selling again pressured futures in the wake of a recent steep downdraft in both live and feeder cattle futures. Declining fresh beef prices have been helping to pressure futures markets. Choice grade cutout values rose 59 cents at noon today, to $335.78, on movement of 72 loads. Cash cattle trade started around $124 in the Southern Plains, steady to higher compared with last week in that area. Last week’s average cash price was $125.61, though the northern market pulls up the average. Beef packers are likely bought ahead on slaughter needs and thus traders anticipated cash prices would trade at steady-lower levels this week. Traders await USDA’s weekly U.S. export sales report, with market bulls hoping for a repeat of last week’s strong numbers.
Technical analysis: The live and feeder cattle futures bears have the overall near-term technical advantage amid steep price downdrafts from the August highs. However, both markets are now well oversold on a near-term basis, which could lead to a corrective upside bounce.
Live cattle bulls' next upside price objective is to close October futures above solid resistance at $127.00. The next downside technical objective for the bears is closing prices below solid technical support at the June low of $119.92. First resistance is seen at today’s high of $124.55 and then at this week’s high of $125.75. First support is seen at $123.00 and then at $122.00.
For feeder market bulls, the next upside price objective is closing October above technical resistance at $166.00. The next downside price objective for the bears is to close October below solid technical support at $155.00. First resistance is seen at today’s high of $161.30 and then at this week’s high of $163.16. First support is seen at $158.00 and then at $157.00.
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.