Hogs
Price action: Lean hog futures finished high-range with gains of 7 1/2 to 87 1/2 cents in the October through June contract. Nearby futures led to the upside.
Fundamental analysis: Nearby futures enjoyed light short-covering today thanks to ideas the downside has been overdone and the steep discount the contracts hold to the cash hog index. The index has declined in recent weeks, but so have futures. Softer corn prices were also supportive, as traders are hopeful feed costs will soon decline.
But short-covering is the extent of buying interest as seasonally expanding supplies have weighed heavily on both the cash hog and pork markets. Cash hog bids were as much as $2.00 lower today.
Technical analysis: While October lean hogs ended with gains for the day, they still have a way to go to reach initial resistance at the double-bottom August 7-8 low of $74.90. Friday’s contract low of $72.30 is initial support.
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 weakened in late trade to finish 62 1/2 cents to $1.47 1/2 lower in the 2012 contacts, with 2013 contracts down 5 to 65 cents.
Fundamental analysis: Traders strongly suspect the beef market has posted a near-term high, with retailers reportedly fully stocked for the last official grilling weekend of the summer. Concerns demand for higher-quality cuts will taper off this fall led to late-session profit-taking.
This week’s cattle showlist is slightly tighter than last week thanks to smaller numbers in Kansas. But demand for cash is expected to be lackluster as packers have plenty of contract supplies to draw from this week.
Technical analysis: October live cattle posted a downside day of trade on the chart to return to the middle of the long-lasting consolidation range. Resistance at the top of the range stands at $127.22 1/2, while support lies at the 2012 low of $119.77 1/2.
Feeder cattle
Price action: Feeder cattle futures ended 15 to 50 cents lower in the August through November contracts, with the rest of the market mixed.
Fundamental analysis: Feeder futures saw spillover from pressure in the live cattle pit, although this was limited by weakness in the corn market. August feeder futures are trading in line with the cash index.
Technical analysis: September feeder futures posted a low-range close, which gives bears more momentum heading into tomorrow’s session. Near-term boundaries are support at last week’s low of $140.70 and resistance at the August high of $145.12 1/2.
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.
