Hogs
Price action: Lean hog futures ended the day mixed, with October and December futures down 2 1/2 to 20 cents and the rest of the market up 27 1/2 to $1.20. For the week, futures posted sharp losses.
5-day outlook: Traders’ attitudes have turned increasingly bearish, pushing futures into oversold territory. Nearby contracts are trading at a steep discount to the cash index, which opens the door for some short-covering. But with the cash market is expected to be steady to weaker again next week due to plentiful supplies, traders will be comfortable with nearby futures at a discount to the cash market.
30-day outlook: Frozen pork stocks at the end of July came in below traders’ expectations and down 8% from the previous month, but they were still up 20% from a year-ago and a record for the month. Given signs producers have embarked on significant culling of the breeding herd due to high feed costs, traders are concerned supplies could overburden the pipeline.
90-day outlook: Stepped up sow liquidation now puts more burden on demand now, but down the road it points to tighter supplies.
Technical analysis: December lean hog futures gapped lower on the open and posted a fresh contract-low close of $70.60. The contract has a lot of work ahead in order to signal a low has been posted, as bears clearly have the technical advantage.
Hedgers: Carry all risk in the cash market for now.
Feed needs: Risk is covered in the cash market for now.
Live cattle
Price action: Live cattle futures ended 45 to 65 cents lower today and posted slight to moderate losses for the week. Feeder cattle closed 12 1/2 to 77 1/2 cents lower today to end near-steady to slightly higher for the week.
5-day outlook: This week’s cash cattle trade came in steady with the previous week at $120 to $121 due to tighter market-ready supplies. But there are concerns the beef market has posted a near-term high as retailers have completed their purchases for Labor Day features -- the last official “grilling” holiday of the summer.
30-day outlook: At the end of July, frozen beef stocks were down 3% from the previous month, but still up 10% from year-ago levels. Some stockpiling of supplies is occurring as end users remain concerned about the prospects for higher beef prices later this year, but for now, traders aren’t overly concerned about the tightening supply situation as the data points to “enough” beef to keep the market satisfied.
90-day outlook: The Cattle Inventory Report points to tightening supplies into next year. Calf supplies have tightened dramatically and until the weather improves across the Corn Belt and Plains, producers will be reluctant to rebuild their herds. This puts more beef in the pipeline over the near-term, but means supplies will be even tighter over the longer-term.
Hedgers: Fed cattle producers should carry all risk in the cash market for now. Feeder cattle sellers and buyers should also carry all risk in the cash market for now.
Feed needs: Risk is covered in the cash market for now.
