Hogs
Price action: Nearby lean hog futures ended higher on short-covering, with the October and December contracts up $1.22 1/2 and $1.07 1/2, respectively. February hogs ended 7 1/2 cents higher, with the rest of the market down 30 to 62 1/2 cents.
Fundamental analysis: Traders’ focus was on evening positions, as they worked to narrow the discount nearby contracts hold to the cash index. However, it will be difficult for the market to generate followthrough buying tomorrow given ongoing weakness in the cash hog market. Cash hog bids were as much as $2 lower today and more of the same is expected tomorrow. While packers’ profit margins are well in the black, they have no reason to raise bids given the seasonal increase in supplies and sow liquidation.
Technical analysis: October lean hog futures posted an upside day of trade on the daily chart, but they remain well within the boundaries of the downtrending channel. To signal a near-term low is in the works, the contract needs closes above last week’s high of $75.20. But to confirm a low, closes above the mid-August high of $77.70 are needed. Contract-low support lies at $70.45.
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 finished mostly lower following a choppy session.
Fundamental analysis: Cattle futures faced modest profit-taking pressure in most contracts today amid concerns the boxed beef market may be nearing a short-term top. But selling interest was limited as cash cattle prices came in $2 higher at $124 to $125 in the Plains late last Friday. Fundamental focus will be on the boxed beef market as traders form cash cattle opinions for the week. If the product market gives any indication of a short-term top, traders will be reluctant to pump fresh money into futures.
Technical analysis: October live cattle futures posted a bearish reversal today. With resistance at the top of the extended, choppy range holding, followthrough selling Tuesday could signal a short-term technical top.
Feeder cattle
Price action: Feeder cattle futures finished with slight gains across the board.
Fundamental analysis: Pressure on the corn market, especially from mid-morning on, supported feeder cattle futures. Unless the corn market signals an extended price pullback is in the works, however, traders will remain reluctant buyers in the feeder cattle market.
Technical analysis: Last week’s high at $147.80 is initial resistance for October feeder cattle. Above that, resistance is at $150.50 and $152.00.
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.
