Hogs
Price action: Lean hog futures ended mixed with 2012 contracts 97 1/2 cents to $1.87 1/2 lower and deferred months narrowly mixed.
Fundamental analysis: Burdensome supplies continues to weigh on lean hogs. Production is picking up seasonally and high feed costs have encouraged aggressive herd liquidation. Record slaughter numbers have not been enough to keep up with this expansion. Thus, pork prices continue to soften (though movement has remained strong) and packers have been able to improve profit margins by keeping bids steady to lower. Heavy losses in the front-month October contract signal traders see more downside ahead for the cash hog index.
Technical analysis: December lean hog futures are back near contract-low support at $70.30. A move through that level would layer support every 50 cents lower starting at $70.00. Yesterday’s high of $73.10 is near-term resistance.
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 mixed with October and December futures 27 1/2 and 5 cents lower, respectively, and deferred months 10 to 22 1/2 cents higher. This was a high-range close for most contracts.
Fundamental analysis: Action in the live cattle market was choppy as traders continue to wait for cash cattle trade to begin. Most expect trade to take place at higher prices compared to last week, but nearby futures are already at a $3-plus premium to the top of last week’s range, opening the door for some light profit-taking. Strength in the boxed beef market is the reason for such expectations as prices and movement have steadily improved this week.
Technical analysis: October live cattle remain within a short-term trading range, with the parameters of the August high of $127.22 1/2 on the upside and the psychologically significant $125.00 mark on the downside.
Feeder cattle
Price action: Feeder cattle futures futures saw mixed trade today, but the market softened into the close to finish at or near session lows with losses of 42 1/2 to 87 1/2 cents.
Fundamental analysis: Strengthening corn prices helped bears to take control of the feeder cattle market ahead of the close. Feeders saw mixed trade much of the day thanks to ideas pressure on corn will mount as harvest picks up. But until the corn market shows signs a top is in, buying interest in the feeder cattle market will remain limited.
Technical analysis: October feeder cattle futures remain within their multi-month uptrend and well above uptrending uptrending support drawn off the lows since mid-June, which intersects around $143.61 tomorrow. The next layer of resistance is the top of the July 12 downside gap at $150.50.
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.
