Hogs
Price action: Lean hog futures faced pressure much of the day, but the market firmed late in the session to end with gains ranging from 2 1/2 to 50 cents.
Fundamental analysis: The lean hog market benefited from late short-covering after the dollar plummeted following the Federal Reserve’s economic stimulus program announcement. Plus, mostly steady cash hog bids today were an improvement over recent weeks.
The cash hog market has posted 20 straight days of declines as supplies are expanding seasonally and high feed costs have encouraged aggressive sow liquidation. The seasonal tendency is for supplies to continue to build until December or January, signaling more downside risk could still lie ahead.
Technical analysis: October lean hogs remain within their week-long uptrend, with resistance standing at last week’s high of $75.20 and support at last week’s contract low of $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 opened mostly higher, but quickly faded on light profit-taking pressure. Futures ended steady to 35 cents lower.
Fundamental analysis: Continued strength in the beef market forced packers to pay up for cattle today, with cash trade reported at $126 to $127 in the Southern Plains, which is up $2 to $3 from last week. October live cattle are trading in line with this week’s higher cash trade while deferred months are at a $3-plus premium to the prices. This spurred some profit-taking into the close.
Technical analysis: October live cattle futures gapped sharply higher on the open but filled the gap and ended low-range. But today’s higher-high is a positive sign traders are willing to test “higher waters.” Key will be if today’s low-range close attracts followthrough pressure, as it would signal today’s upside gap was a bull trap. But if the uptrend from the late-August low is sustained, it would keep bulls in control.
Feeder cattle
Price action: Feeder cattle futures ended 15 to 35 cents lower in all but the September contract, which ended 5 cents higher.
Fundamental analysis: Futures started the day stronger, but as corn strengthened feeder futures softened. Still, no technical chart damage was done as traders recognize calf supplies are tightening and the corn market is showing signs a high has been posted. But until traders are convinced a corn-market high has been posted, they will be hesitant to extend their long exposure to the market.
Technical analysis: October feeder cattle futures gapped above $148.00 on the open, but filled the gap and posted a low-range close, which could attract followthrough selling tomorrow.
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.
