Written Commentary
MORNING LIVESTOCK FUTURES OUTLOOK
LEAN HOGS
August hogs had a very bearish gap lower yesterday and accelerated to new contract lows, widening the futures discount to the cash index. December futures trading volume was huge and the highest since the contract came on the board a year ago as prices slipped to a new contract low for the 5th day in a row. Technical indicators are extremely oversold, suggesting a bounce is imminent and with yesterday’s
large volume and a decline in open interest, a bounce is likely to occur before the end of the week. December support is 60.55 and August support 82.90. The average hog weight for Iowa-Southern Minnesota as of July 6 was 285.3 pounds, up from 284.4 pounds the previous week and up from 277.8 a year ago. The 5-year average is 279.3 pounds. The CME Lean Hog Index as of July 8 was 88.43 down from 88.76 the previous session and from 89.17 the previous week. The USDA estimated hog slaughter came in at 477,000 head yesterday. This brings the total for the week so far to 1.415 million head, down from 1.419 million last week at this time but up from 1.386 million a year ago.
China’s national average spot pig price as of July 11 was down 1.33% from the previous day. For the week prices are up 0.87%, up 4.98% for the month and up 29.00% year to date and up 32.50% versus a year ago. Dalian live hog futures as of July 11 were down 0.3% from the previous day. For the week prices are down 0.7% and up 1.25% for the month and up 5.69% year to date.
LIVE CATTLE
August cattle closed near unchanged yesterday and part of this week’s break may have come from a story out of the UK saying viral bird flu samples taken from cows were able to attach to receptors found on cells in the human respiratory tract. Importantly, the version of the virus found in birds is unable to do that, which suggests the bovine virus has mutated. While the CDC still says the risk to humans is low, headline traders may have been one reason for the break. 90% lean cow beef hit another new high for the year. Cash trade yesterday was seen in all regions except for Colorado. The 5-area, 5-day weighted average is now 193.93 for the week, down from 195.65 at the end of last week. August futures key
support is 180.82, which was Tuesday’s low and trendline support as well. The USDA estimated cattle slaughter came in at 122,000 head yesterday. This brings the total for the week so far to 354,000 head, up from 353,000 last week at this time but down from 377,875 a year ago. The USDA boxed beef cutout was down 41 cents at mid-session yesterday and closed $1.61 lower at $324.05. This was down from $330.39 the previous week. The previous low was $323.33 on June 27. The previous high was $325.66 on July 9.
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