Technically Speaking

Weekly Analysis: Live Cattle, Feeder Cattle, Lean Hogs

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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With plenty of U.S. hogs available for packers and investors concerned about pork tariffs from China and Mexico, 2018 has already been a tough year for hog prices (DTN ProphetX chart).

Lean Hogs: The last time we looked at the hog chart in this space, the August contract was trying to hold support above the 62% retracement line at $73.60. Support gave way to lower prices in early July and now, in early August we see October lean hogs struggling to find buying interest as prices get close to their 2016 low of roughly $48.00. The June 1 Hogs and Pigs report showed a 4% increase in the March-May pig crop, and with pork tariffs from China and Mexico hurting demand, investors have stayed comfortably short as prices trend lower. If there is hopeful news here, it is that commercials are finding attractive value at these low prices, and tariff decisions can change unexpectedly. Otherwise, the trend remains down.

Live Cattle: October live cattle closed up $1.52 last week to $112.00 on Friday, its highest weekly close in five months. Two recent factors worth noting were that this summer's drought-related selling did not break cattle prices lower and boxed beef demand likely got help the past few weeks from moderate summer temperatures across the Midwest. Technically, the view for cattle still remains consistent with the bullish change of trend we described in this space on June 11. October live cattle prices have been choppy, but continue to trade higher after correcting sideways to lower for roughly a year, following the peak of June 2017.

Feeder Cattle: September feeder cattle ended up 85 cents last week, not straying far from its high in July while live cattle made a new five-month high. Similar to live cattle, feeders have been in a corrective pattern since their high in May 2017, and I suspect the correction ended in May of 2018. Prices have gradually worked higher since and there are two technical factors that lead me to believe feeder cattle prices will keep trading higher. One is that prices only fell back 16% in their one-year correction -- not very far. The other bullish factor is that both noncommercials and commercials are currently net long in feeder cattle, which suggests prices have good support at current levels. The weekly stochastic showed us a bullish change in momentum on June 11 but looks more overbought now, yet that does not preclude a possible breakout to the upside.

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.

Follow him on Twitter @ToddHultman

(BAS/SK)

Lean Hogs: The last time we looked at the hog chart in this space, the August contract was trying to hold support above the 62% retracement line at $73.60. Support gave way to lower prices in early July and now, in early August we see October lean hogs struggling to find buying interest as prices get close to their 2016 low of roughly $48.00. The June 1 Hogs and Pigs report showed a 4% increase in the March-May pig crop, and with pork tariffs from China and Mexico hurting demand, investors have stayed comfortably short as prices trend lower. If there is hopeful news here, it is that commercials are finding attractive value at these low prices, and tariff decisions can change unexpectedly. Otherwise, the trend remains down.

Live Cattle: October live cattle closed up $1.52 last week to $112.00 on Friday, its highest weekly close in five months. Two recent factors worth noting were that this summer's drought-related selling did not break cattle prices lower and boxed beef demand likely got help the past few weeks from moderate summer temperatures across the Midwest. Technically, the view for cattle still remains consistent with the bullish change of trend we described in this space on June 11. October live cattle prices have been choppy, but continue to trade higher after correcting sideways to lower for roughly a year, following the peak of June 2017.

Feeder Cattle: September feeder cattle ended up 85 cents last week, not straying far from its high in July while live cattle made a new five-month high. Similar to live cattle, feeders have been in a corrective pattern since their high in May 2017, and I suspect the correction ended in May of 2018. Prices have gradually worked higher since and there are two technical factors that lead me to believe feeder cattle prices will keep trading higher. One is that prices only fell back 16% in their one-year correction -- not very far. The other bullish factor is that both noncommercials and commercials are currently net long in feeder cattle, which suggests prices have good support at current levels. The weekly stochastic showed us a bullish change in momentum on June 11 but looks more overbought now, yet that does not preclude a possible breakout to the upside.

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.

Follow him on Twitter @ToddHultman

(BAS/SK)

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