Livestock Analysis | October 17, 2023

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: Hog futures couldn’t sustain early Tuesday gains, with the nearby December contract ending the day at $67.55, down 75 cents on the day, after posting a contract low at $67.30 late in the session.

Fundamental analysis: Anticipation of large seasonal losses came to the fore in hog futures again Tuesday, with the December contract closing about $13.75 under the latest unofficial quote for the hog index (which futures cash-settle against). The index for last Friday was officially stated at $81.60 this morning, down 51 cents from Thursday. Today’s preliminary calculation for Monday’s quote fell another 45 cents to $81.15.

Futures began the day quite strongly in seeming reaction to yesterday’s closing advance in wholesale prices, to $91.22, but today’s news of a $1.93 midsession drop to $89.29, the lowest pork carcass prices since late May, probably triggered the selling that carried the market lower later in the day. Seasonal weakness, as well as indications hog slaughter will run modestly above year-ago levels during the fourth quarter, are apparently keeping sellers participating more actively in the market.

Technical analysis: Bears still own the short-term technical advantage in December futures, especially with the contract having fallen to a fresh contract low this afternoon. The former low of $67.325 was posted May 26. Bears will almost surely be looking to force a followthrough move below support in that area, with a likely initial target at $65.00. Look for initial resistance at Monday’s low of $68.125, then around the openings posted yesterday and today at $69.00. Expect psychological resistance at $70.00.

What to do: Get current with feed advice. Carry all production risk in the cash market for now.  

Hedgers: Carry all risk in the cash market for now.

Feed needs: You have all corn-for-feed and soymeal needs covered in the cash market through October.

 

 

Cattle

Price action: December live cattle futures rose 32.5 cents before settling at $186.875, near the session low. November feeder cattle futures rallied 52.5 cents before closing at $250.45.

Fundamental analysis: Cattle futures gapped higher on this morning’s open though the market saw some profit-taking throughout the session as choppy trade continues. The strength seen in the wholesale market likely sparked buyer interest, as Choice cutout has been seemingly stuck near $300.00 and Select stuck near $275.00. Followthrough strength seen today above those levels likely encouraged bulls. The strength seen in the cash market has driven packer margins further in the red, so strength seen in cutout could provide some incentive for packers to enter cash negotiations. Choice cutout rose 47 cents to $305.14 while Select rose 74 cents to $277.94. Movement improved to 93 loads, which is more than the past two daily totals, showing increased demand from retailers.

Cash cattle negotiations are off to a sluggish start this week, with packers likely pushing negotiations until the end of the week following Friday’s Cattle on Feed report. If wholesale beef prices continue to press higher, it might encourage packers to enter negotiations sooner, but Choice has struggled much above $300.00 in recent weeks, so some weakness in the latter half of the week is possible.

Technical analysis: December live cattle futures gapped higher on the session but struggled holding onto gains near the close. Prices have struggled to hold onto last week’s advance but have not fallen much below last Wednesday’s close of $186.975, which will remain an important level. Further support lies at $186.65, which is backed by $185.00. Bulls are targeting resistance of $187.15, ultimately targeting a daily close above $188.00.

November feeder cattle futures remain in a downtrend on the daily bar chart but bounced from $249.70 support this morning. Further selling targets support at the October low, which stands at $248.225, then firm support at $247.50. Bulls are targeting resistance at $251.80, backed by $253.70, then last week’s high at $253.85.

What to do: Get current with feed advice. All production risk in the cash market for now but be prepared for some hedge coverage as we have demand concerns.  

Hedgers: Carry all risk in the cash market for now.

Feed needs: You have all corn-for-feed and soymeal needs covered in the cash market through October.

 

 

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