Technically Speaking

October Hogs Lose Upward Momentum

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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October lean hogs have lost their upward momentum, while noncommercials remain heavily long. So far, prices are holding above support, trading above $80.90 per hundredweight. (DTN ProphetX chart)

Live Cattle: October live cattle were up 25 cents last week to $128.12 hundredweight (cwt) Friday, a quiet performance on the week. For the past two months, prices have stayed within a sideways range, bound from roughly $124 to $130, while cash cattle prices have slowly inched higher. Consumer demand for beef remains favorable, helped by this year's increased economic activity and gains in employment. Cattle inventory has also been coming down as drought in the western U.S. Plains has forced producers to downsize herds. Technically, October cattle futures have traded above their 100-day average since late October 2020 and the average is now at $125.50. Cattle remain in a long, gradual uptrend that has reached its highest October prices in over five years, but shows no sign of breaking trend yet. CFTC data shows 75,076 noncommercial net longs as of Aug. 10, a moderate amount that is not a danger to prices as long as they hold support above $124.00.

Feeder Cattle: September feeder cattle were down 25 cents last week to $163.07, still near its highest September prices since January 2016. The persistent strength of feeder cattle prices is especially impressive in the face of $6-plus corn and a cash fat cattle market that acts reluctant to trade higher. However, retail demand for beef is being helped by a rebound in economic activity. Technically, September feeders are well above their 100-day average at $157.20 and prices are challenging the contract high of $165.52. Noncommercial net longs in feeders total 6,760 as of Aug. 10 and are not a serious threat to prices as long as the uptrend is maintained. So far, the uptrend for feeder prices remains in place with no sign yet of a bearish change in momentum.

Lean Hogs: October lean hogs fell $1.07 last week to $86.52, staying below the 100-day average at $89.30 and well below the June high of $97.97. October hog prices are still trading near their highest levels since 2014 with pork carcass also historically high and indicating strong retail demand. The weekly stochastic shows a bearish change in momentum, however, and prices left behind a lower high of 94.05 in July. The June low of $80.90 appears to be the key level of support. CFTC data shows noncommercial longs total 121,661 as of Aug. 10 and account for 74% of all speculator-held positions. With the former uptrend now violated, a break below $80.90, if it were to happen, would likely trigger significant noncommercial selling and send prices into a downtrend. Until then, October hogs are trading in a range between roughly $80.90 and $94.00.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of livestock and livestock futures involve substantial risk and are not suitable for everyone.

Todd Hultman can be reached at .

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