Cattle Bulls Are Fighting to Keep Prices Moving Higher, but Lean Hogs Are Trapped

December live cattle (LEZ26) futures on Friday fell $1.70 to $221.475 and for the week were down 67 1/2 cents. November feeder cattle (GFX26) futures lost $5.20 to $331.15 and for the week were down 82 1/2 cents. The cattle futures markets on Friday saw some profit-taking pressure from the shorter-term speculators. However, the bulls are keeping price uptrends alive on the daily bar charts. That suggests the path of least resistance for prices will remain sideways to higher in the near term.

The USDA at midday Friday reported moderately active cash cattle trading on the week, with steers averaging $219.90 and heifers $220.79. The agency reported average cash cattle trading the week prior at $220.77. The USDA will come out with last week’s official average cash cattle trading price at midday Monday. 

Daily cattle slaughter volumes have moved back up toward normal seasonal levels as feedlot operations returned to normal after ICE immigration enforcement actions at Kansas packing plants pushed slaughter to one of the lowest non-holiday week slaughters ever. Packer margins have also improved over the period. 

Longer term, the cattle markets bulls still have an ace in the hole: The latest USDA monthly cattle-on-feed report showed August placements and marketings at record lows. The COF report suggested a long cycle that leans price-bullish in the coming months: a small U.S. beef cow herd, eight years of drought-forced liquidation, and a tight calf crop.

Lean Hogs Futures Trending Down, Along with the Cash Hog Market

December lean hog (HEZ26) futures on Friday rose $1.20 to $70.125 and for the week were up $1.10. The hog futures market saw short covering on Friday after hitting a contract low last Thursday. Futures and cash hog prices remain trapped in a downtrend on the daily bar charts, which means the path of least resistance for futures prices in the near term will remain sideways to lower. The CME cash hog index earlier last week showed signs of stabilization, but that was short-lived as the index resumed its slide late last week. The latest CME lean hog index is down 24 cents to $80.71. Today’s projected CME index price is down 51 cents at $80.20. The national direct five-day rolling average cash hog price quote for Friday was $77.85. 

Wholesale pork and cash hog fundamentals have weakened in recent weeks, as live hog weights and stronger daily slaughter numbers build seasonally as demand softens into the fall. These are bearish fundamental headwinds that will continue to limit the upside in lean hog futures in the coming weeks.

On the bright side for lean hog futures, holiday retail demand for hams could prove supportive in the coming weeks, while frozen U.S. pork stocks, U.S. export sales, and the December USDA Hogs & Pigs report are the next fundamental elements. Managed money remains heavily short lean hog futures, so a turnaround in cash hogs or fresh pork cutout could force short covering in lean hog futures.

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On the date of publication, Jim Wyckoff did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.