Cattle market rally may be short-lived, analyst says

Impressive technical action, but upside limited. 

The cattle futures market is seeing a strong recovery rally, but if the beef and the cash cattle markets remain in a downtrend, the upside appears limited.

Live Cattle

The sluggish pace of restaurant reopenings and the loss of supplemental consumer income from the government could spark a more negative demand tone ahead. The rally yesterday was impressive, and it could spark more buying interest, but rallies look like selling opportunities to us.

The USDA boxed beef cutout was down 12¢ at midsession yesterday and closed $1.03 lower at $224.82. This was down from $227.95 the previous week and was the lowest the cutout had been since August 19. 

Cash live cattle have had a quiet start to the week, with no trades reported for Monday or Tuesday. The five-area weekly weighted steer price last week was $103.12, down from $105.09 the previous week but up from $101.73 a year ago.

The USDA estimated cattle slaughter came in at 118,000 head yesterday. This brings the total for the week, so far, to 121,000 head, down from 239,000 last week at this time and down from 235,000 a year ago.

Market Ideas 

December cattle resistance is at 110.62 and 111.42, with close-in support at 108.27. It will take a close above resistance to assume that the major trend is up. 

Lean Hogs

The steady-to-higher pork values support packer margins and hold cash uptrend.

The continued strong surge in pork cutout values and the fact that producers remain current with marketings are factors that could keep the short term trend up. However, the market will need to see continued strong exports to hold pork prices at high levels during the period of increasing slaughter from mid-September through mid-November. We are approaching a seasonal period for pork prices. 

December hogs closed slightly higher on the session yesterday and experienced their highest close since May 4. The continued advance in pork product prices has helped support the uptrend in the cash market, and this leaves futures in a steady uptrend. 

The CME lean index as of September 3 was $58.64 per hundredweight, up from $58.13 the previous session and up from $57.05 a week before. The USDA estimated hog slaughter came in at 474,000 head yesterday. This brings the total for the week so far to 480,000 head, down from 951,000 last week at this time and down from 979,000 a year ago.

The USDA pork cutout, released after the close yesterday, came in at $80.57, up 76¢ from $79.81 on Friday and up from $72.03 the previous week. This was the highest the cutout had been since May 29. A year ago the cutout was $71.30.  

Market Ideas

There is still no technical sign of a short-term peak, as pork demand indicators are strong and packer margins are deep in the black. Short-term support for December hogs is now at $57.27, with $60.35 as the next resistance. October hog support is at $58.02, with $62.57 as the next upside target. 


For daily updates on cattle, hogs, corn, wheat, and the soy complex, visit hightowerreport.com.

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*** This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. Any information or recommendation contained herein: (i) is not based on, or tailored to, the commodity interest or cash market positions or other circumstances or characterizations of particular investors or traders; (ii) is not customized or personalized for any such investor or trader; and (iii) does not take into consideration, among other things, risk tolerance, net worth, or available risk capital. Any use or reliance upon the information or recommendations is at the sole discretion and election of the subscriber. The risk of loss in trading futures contracts or commodity options can be substantial, and traders should carefully consider the inherent risks of such trading in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of The Hightower Report is strictly prohibited.

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