There are short term fundamentals in the market that are supportive to hog prices, but with continued trade tension between the U.S. and China, we could see more downward pressure. Helping the hog prices though is the continued rise in Chinese pig value with the Chinese Ministry of Agriculture indicating that the rise of Pork prices in June and that the tightness in pork supply is predicted to be even more intensified in the second half of the year. Chinese pork prices are up 40% year to date, indicating a strong need for the Chinese to import pork, which should be supportive to U.S. prices. In the October contract, with the strong price action we saw yesterday, and if we see continued follow through today, we should see this market make a run back up to the $77.75 level which would confirm the double bottom reversal chart pattern. The USDA pork carcass cutout value was up $2.90 at $75.80 on very good movement of 366 loads. The butt was the only primal reported lower, with the belly up $9.53. Estimated packer margins were $3.46/head for non-integrators and $30.24/head for integrators vs. $-0.92 and $24.25 the previous day. Weekly IA/MN hog weights came in at 280.0 lbs. vs. 280.2 lbs. last week and 276.5 lbs. last year. Weekly kill is up 3.49% vs. last year.

In the October live cattle contract, the long-term fundamentals are bullish but in the near term we could see a small technical pullback due to overbought conditions from my stochastic and RSI indicators. Supply is tightening in the market, so we should see this market trade higher over the next month. Within the next couple days, I expect prices to test the 110.55 price and a break through this level to test the 112.00 level. If there is a rejection at the $110.00 price we could see retracement back to $108.75. The USDA boxed beef cutout value was up 64 cents at mid-session yesterday, but closed 34 cents lower at $212.93, down from $214.73 the prior week. The estimated cattle slaughter came in at 121,000 head yesterday bringing the total for the week so far to 238,000 head, which is down from last week which was 241,000. Cash prices in Texas traded at $111-112 last Friday, up $4 on the week.

Lean Hogs Oct ’19 Daily Chart

Lean Hogs Oct '19 Daily Chart

Live Cattle Oct ’19 Daily Chart

Live Cattle Oct '19 Daily Chart

Peter McGinn

Peter graduated from DePaul University with a degree in Economics. Peter started his career with an IB at the Chicago Board of Trade. He then moved on to TradeStation Securities for a time before starting as a Market Strategist at RJO Futures in 2018.