Livestock Analysis | October 19, 2023
Price action: Nearby December lean hog futures ended Thursday having slipped 2.5 cents to $68.00. Deferred contracts closed steady-to-mixed.
Fundamental analysis: The hog and pork complex remained under seasonal pressure as the supply of market-ready hogs and pork increases seasonally, whereas consumer demand for most pork cuts is likely approaching annual lows. Tuesday’s quote for the CME hog index fell 45 cents to $80.70, while Wednesday’s preliminary calculation put it at $80.45, down another 25 cents. The fact that it declined less than did Tuesday’s figure suggests emerging cash market support.
One could also interpret today’s 21-cent rise in the midsession quote for pork cutout, at $88.16 as implying renewed firmness, although the steady losses posted over the past four sessions suggests otherwise. We still think fourth-quarter consumer demand for pork will prove stronger than it did in late 2022 due to reduced retail pork prices. In addition, with Aug. 31 ham stocks at three-year lows and whole turkey stocks at their lowest August level since 2007, we suspect the ham market is going to perform relatively well in the coming weeks. That could provide considerable support for hog and pork values.
Technical analysis: Bulls powered a strong advance in early Thursday trading but proved unable to sustain it. That means bears retain the short-term technical advantage in December hog futures. Today’s action confirmed solid support at Tuesday’s contract low of $67.30. A close below that level would have bears targeting the psychologically important $65.00 level. Look for initial resistance at today’s opening price of $68.35, with backing from the daily high at $69.45 and between the 10-day moving average near $69.88 and the psychological $70.00 level. A close above the latter point would have bulls targeting the 40-day moving average near $72.77.
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 November.
Price action: December live cattle fell $1.90 to $185.30 and near the session low. November feeder cattle dropped $5.225 to $244.50. Prices closed near the session low and hit a nearly four-month low.
Fundamental analysis: The cattle futures markets saw sharp price losses today as general risk appetite in the marketplace is still not keen, amid the unfolding Middle East crisis. The solid corn gains today and this week’s soybean and meal gains pressured feeder futures strongly lower, reflecting increased feed costs. However, the implied rise in expenses and implied commensurate drop in feedlot placements still holds the corollary of diminished fed cattle supplies down the road.
Packers have been slow to establish cash cattle bids, with only light sales reported so far this week at roughly $1.00 higher prices in the far northern market. Cash trade is likely to be pushed late into the week following Friday’s Cattle on Feed Report. The daily USDA report for the five direct markets says 2,506 head of cattle changed hands Wednesday on a live basis. It’s impressive the packer paid $186.91 per hundredweight. A look at the state reports shows all but 112 of those changed hands at $186.95 in Iowa, with those 112 selling in Nebraska at $186.00.
Today’s noon report showed wholesale beef prices weakened again, with Choice grade falling $2.03 to $301.83, while Select grade dropped $1.40 to $276.95. The Choice/Select spread is $24.88. Movement at midday was decent at 86 loads. Dressed steer weights show the latest reading for the week ended Oct. 7 at 922 lbs/head. That’s up 2 pounds from the previous week and the same week last year. It’s 8.6 pounds over the five-year average, which is in line with the increases see through much of summer.
USDA’s weekly export sales report this morning showed U.S. beef sales of 400 MT, a marketing-year low--down 95% from the previous week and 97% from the four-week average.
Technical analysis: The live cattle futures bulls have the overall near-term technical advantage. The next upside price objective for the bulls is to close December futures above solid resistance at the contract high of $192.05. The next downside technical objective for the bears is closing prices below solid technical support at the August low of $181.925. First resistance is seen at $187.00 and then at last week’s high of $188.125. First support is seen at the October low of $184.25 and then at $183.00.
The feeder cattle futures bears have gained the overall near-term technical advantage. A five-week-old downtrend is back in place on the daily bar chart. The next upside price objective for the feeder bulls is to close November futures prices above technical resistance at $253.85. The next downside price objective for the bears is to close prices below solid technical support at $240.00. First resistance is seen at $246.00 and then at today’s high of $248.975. First support is seen at today’s low of $243.825 and then at $243.00.
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 November.
