Livestock Analysis | November 2, 2023

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: Hog futures surged Thursday, with nearby December leading the way higher with a $3.125 advance to $73.275.

Fundamental analysis: Hog traders have apparently been rethinking their short-term outlook lately, as indicated by the sharp rebound from the market’s October 20 lows. For example, after having dipped to $65.40 that day, the December contract has rallied almost $8.00. What is most remarkable about the rebound is the sustained weakness exhibited by the cash market during the interim. That is, the CME Lean Hog Index was quoted $79.07 that day and has declined every day since. On the other hand, the rate of decline has slowed significantly. For example, the index for Tuesday (10/31) was officially quoted 19 cents lower at $76.94 today, as expected, while Wednesday’s preliminary figure slipped just 10 cents to $76.84.

Moreover, the wholesale market continues holding firm. As pointed out earlier this week, it dipped to $87.13 on October 19 and has since moved sideways. Indeed, today’s midsession quote rose $1.13 to $87.63 on strength in loins, butts, hams and bellies. Given seasonally large hog supplies, as well as the modest year-to-year increases in hog slaughter seen routinely this year, this firmness certainly reflects no shortage of pork (with the exception of comparatively tight ham stockpiles available for the holiday season). Conversely, after keeping retail pork prices well above year-ago levels through late 2022 and early 2023, grocer price cuts beginning in late spring have apparently kept consumers actively buying pork. We suspect that demand strength will continue supporting the market during the coming weeks.

Technical analysis: Bulls now own the short-term technical advantage in nearby December hog futures, especially with today’s upward surge seemingly representing a follow-through breakout from a ‘bull flag’ formation. This suggests the rally could carry the contract up to the $76.00-$77.00 area in short order. Today’s high marks initial resistance at $73.35, with stiffer resistance seeming likely to emerge in the $74.00-$77.00 congestion area the contract occupied during July. The 40-day moving average near $71.59 looks like initial support, with added support likely to emerge between the 20- and 10-day moving averages at $69.52 and $69.15, respectively.

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.   

 

 

Cattle

Price action: December live cattle rose $1.05 to $184.675 and nearer the session high. January feeder cattle leapt $4.15 to $242.175 and near the session high.

Fundamental analysis: The cattle futures markets today saw technical buying featured as the chart postures for both live cattle and feeder cattle improved today. A solid rally in the U.S. stock market today also improved trader and investor risk sentiment in the general marketplace, which also helped the cattle futures markets bulls, as did a rally in the crude oil market and a lower U.S. dollar index.

Cash cattle trade has been limited so far this week, with our cash sources still expecting steady-to-higher prices to occur once more active trading does commence. Light trading of lower-quality cattle Wednesday averaged $184.74, well above the week-prior figure. The noon beef report today showed Choice grade cutout value up $1.71 at $303.89, while Select grade dropped $5.02 at $273.53. Movement at midday was decent at 99 loads. The Choice-Select spread widened to $30.36, once again pointing to a relative shortage of high-quality beef.

USDA this morning reported U.S. beef export sales of 17,100 MT for 2023, down 2% from the previous week but up 71% from the four-week average.

We believe still-solid consumer demand for beef despite record retail beef prices will continue to provide support for the cattle and feeder markets in the coming weeks.

Technical analysis: Today’s price action in December live cattle futures filled a downside price gap on the daily bar chart, to give the bulls more upside momentum. The bears do still have the slight overall near-term technical advantage as prices are still in a five-week-old downtrend on the daily bar chart. The next upside price objective for the bulls is to close December futures above solid resistance at $188.125. The next downside technical objective for the bears is closing prices below solid technical support at the October low of $177.30. First resistance is seen at $185.00 and then at $186.00. First support is seen at this week’s low of $182.30 and then at $181.00.

The feeder cattle futures bears still have the overall near-term technical advantage. However, a six-week-old downtrend on the daily bar chart is now in jeopardy of being negated. The next upside price objective for the feeder bulls is to close January futures prices above technical resistance at $247.50. The next downside price objective for the bears is to close prices below solid technical support at the October low of $233.35. First resistance is seen at today’s high of $242.15 and then at $244.00. First support is seen at $240.00 and then at today’s low of $238.55.

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.  

 

 

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