June live cattle fell $8.57 to $80.85 last week, another new contract low as COVID-19 concerns continue to take prices to levels not considered possible just a few months ago. Typical sentiment readings don't reflect the extreme bearishness being experienced as Friday's Commitments of Traders report showed 60% of noncommercials holding net long, somewhat stunned by the price collapse underway. It also seems odd that here at the lowest prices since 2008, commercials are still net short 21,361 contracts. From a long-term technical view, $80 should hold as long-term support just as it held firm as long-term resistance in the 1980s and 1990s. The big question is: Will support for cattle show up while COVID-19 concerns remain on high alert in the U.S?
August feeder cattle dropped $12.67 last week to $114.42, a new contract low by a slim margin. As with cattle, feeders are caught in the throes of a one-way market that is having problems summoning support while COVID-19 fears remain high. On a monthly chart, August feeder cattle have fallen over 50% from the 2014 high of roughly $238.00 and is now within $5.00 of the 2016 low at $109.90. Adding to frustrations for cattle and feeder prices, choice boxed beef prices are maintaining a relatively high level, ending at $230.44 on Friday afternoon. The current sell-off doesn't make sense other than to say that the demand side of the market has temporarily disappeared for cattle and feeders. If $109.90 doesn't hold, the next long-term low is $88.30 from 2008.
June lean hogs lost $15.92 last week, finishing at $48.32, the lowest June price since 2002. Even in the age of the coronavirus, U.S. pork exports are up 80% year-to-date compared to a year ago, but that has meant nothing to U.S. hog prices. Record inventory of U.S. hogs and pigs plus fears of what will happen to pork demand while everyone stays close to home has kept potential buyers extremely cautious. Pork cutout values fell to $57.37 Friday, the lowest in at least seven years. The year 1998 is remembered for a disastrous collapse in hog prices, and it is interesting that the low in the June contract that year was $45.12. The more obvious source of support on a long-term chart is the $40 mark, a source of support for June hogs since 1980.
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 Todd.Hultman@dtn.com
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