Livestock Analysis | November 9, 2023
Price action: December lean hogs fell 5 cents to $71.45 and nearer the session low.
Fundamental analysis: It was not a bad day for the lean hog futures bulls, given the huge losses suffered in live and feeder cattle futures today.
The hog market bulls got some support today from better weekly USDA pork export data. The agency this morning reported weekly U.S. pork export sales of 49,000 MT for 2023. That’s up 58 percent from the previous week and up 77 percent from the prior 4-week average. Increases were primarily for China at 13,100 MT. Shipments of 35,500 MT were up 23 percent from the previous week and 29 percent from the prior 4-week average.
The official CME lean hog index quote for Tuesday matched the preliminary figure at $76.69, up 42 cents from Monday. Wednesday’s calculation implies another increase of 18 cents to $76.87. The national direct five-day rolling average cash hog price today was $68.56. The noon report today showed pork cutout value rose 5 cents to $86.63, led by a $4 gain in bellies. Movement at midday was 152.83 loads.
Technical analysis: The lean hog futures bulls and bears are on a level overall near-term technical playing field. However, prices are in a fledgling uptrend on the daily bar chart. The next upside price objective for the hog bulls is to close December prices above solid chart resistance at $75.00. The next downside price objective for the bears is closing prices below solid technical support at $69.00. First resistance is at Wednesday’s high of $72.85 and then at this week’s high of $74.275. First support is seen at today’s low of $71.10 and then 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 November.
Price action: Ideas that cattle supplies are set to surge seemed to sink the cattle markets Thursday, with nearby December live cattle diving $5.05 to $174.30 and most-active January feeders plummeting $7.85 to $224.925. Expiring November feeders also tanked by $5.55 to $229.00.
Fundamental analysis: Live cattle and feeder futures broke down dramatically Thursday despite the relatively stable cash and wholesale market situations. Packers did persuade a few more Iowa and Nebraska producers to take $180.00-$181.00 for their cattle Wednesday, with the five-area average for Monday-Wednesday falling to $180.81, down about $4.00 from last week. Today’s futures breakdown seems likely to cause other cattlemen to cut their asking prices accordingly, but we suspect many will prove more stubborn.
Meanwhile, after falling below $300.00 earlier this week, choice beef cutout rose 30 cents to $299.05 today. Select cutout slid 54 points to $270.59, which left the choice-select spread at $28.56. The numbers still imply the supply of high-quality beef remains limited. Traders seemingly see consumer beef demand dropping despite persistent buying strength exhibited so far this fall.
Feeder futures led the way lower today despite sizeable losses suffered by the grain and soy complexes in the wake of the midsession Crop Production report. The breakdown left the various yearling contracts far below the latest quote for the CME feeder index at $238.13. Given its expiration next Thursday, the November future seems underpriced.
Technical analysis: Bears certainly own the short-term technical advantage in December live cattle futures in the wake of today’s price action. Former support at yesterday’s low of $176.625 now looks like strong resistance, although some psychological selling is likely to emerge at the $175.00 level as well. Look for added resistance at the Oct. 24 low of $177.30. Today’s low marked initial support at $174.125. Late-May highs suggest another band of support starting around $172.50, with psychological support then likely to emerge around $170.00.
Bears hold the strong technical advantage in January feeder futures as well. Initial support at today’s low of $224.525 is only slightly below the daily close. Look for psychological support around $220.00. The weak close suggests initial resistance at the psychological $225.00 level, with backing from Wednesday’s and Tuesday’s lows of $227.425 and $230.20, respectively.
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.
