Livestock Analysis | September 9, 2021

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Hogs

Price action: October lean hogs fell $1.90 to $85.475 per hundredweight, the lowest closing price since $83.875 on Aug. 10.

Fundamental analysis: Lean hog futures bulls’ recent notions the market had found a near-term bottom were dashed amid weaker cash hog prices and despite this week’s rebound in the wholesale pork market. USDA’s noon pork report showed average carcass cutout values rose another $1.02 to an average of $110.18, led by gains in loins. Movement at midday was 150.17 loads.

The average national direct cash hog price on fell $2.22 to $87.05. The latest CME Lean Hog index was down 56 cents to $98.74, about $13 above the October futures price. Today’s hog slaughter was estimated at 478,000 head compared to 478,000 last Thursday and 486,000 one year ago at this time. Expectations for a seasonal rise in hogs coming to market and a slowdown in consumer demand continue to weigh on the lean hog futures market.

Traders await tomorrow’s weekly USDA export sales report, delayed by one day due to the Labor Day holiday, with hog market bulls hoping for continued good export demand for U.S. pork.

Technical analysis: The lean hog bears have gained the overall near-term technical advantage. The next upside price objective for the hog bulls is to close October futures prices above solid chart resistance at $90.00. The next downside price objective for the bears is closing prices below solid technical support at the August low of $83.325. First resistance is seen at today’s high of $88.25 and then at Wednesday’s high of $89.35. First support is seen at today’s low of $85.275 and then at $84.00.

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.

 

Cattle

Price action: Weak cattle and beef prices stifled efforts to rally cattle futures Thursday. October live cattle rose 65 cents to $123.75 per hundredweight, the first gain in five days. October feeder cattle fell 2.5 cents to $159.25.

Fundamental analysis: Concerns about the strength of consumer demand amidst the spread of the Delta Covid variant are apparently weighing upon the cattle market at this juncture. Recent wholesale losses, including a $1.59 drop to $333.27 at noon today, are likely the main driver of bearish sentiment, but traders were probably reacting to the latest report on cash trading. That showed relatively active midweek trading had averaged $124.28, down about $1.50 from last week.

Bulls can take some consolation from the hugely elevated price of beef and the relative cheapness of fed cattle in comparison. That disparity will likely be mitigated at some point in the not-too-distant future, but the shift may require some trigger before occurring. The wholesale market’s historical tendency to post a second-half low in early-to-mid-October also suggests a timeframe for a bullish reversal.

Technical analysis: Given the recent breakdown that carried prices lower in most sessions of the past two weeks, the bears seem fully in control of the cattle pit at this point. However, the market is now pushing into oversold territory, so at least a short-term bounce seems due. Initial support is marked by Wednesday’s low of $123.025 in the October contract. Additional support is layered between $120.00 and $122.00, but a drop below that range would open the door to a much larger breakdown. Initial resistance is likely to emerge around $125.30, with additional selling being implied by the contract’s April and May highs at $127.25 and $126.75, respectively. Bulls will be targeting the pivotal $130 level if they are able to top that range.

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.

 

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