Livestock Analysis | November 13, 2023
Price action: December lean hog futures rallied $1.45 before settling at $73.35.
Fundamental analysis: Lean hog futures surged above technical resistance despite soaring feed costs in a day that saw most commodities rally. December soybean meal spent much of the session limit up and corn rallied over a dime, though hog futures shrugged off higher inputs as the bulls maintained firm control of the market. Despite last week’s bounce, the CME lean hog index has turned lower, falling 59 cents today to $76.28 (as of Nov. 9). The preliminary calculation puts the index down another 23 cents tomorrow to $76.05, which would mark a new for-the-move low. Futures bulls remain bullish despite the resurgent weakness, evidenced by the spread between December futures and the index to just $2.70.
Wholesale pork prices continue to struggle against the $90.00 mark, as the midsession quote fell 96 cents to $88.46. Prices surged on Friday, though movement was light ahead of Veterans Day. Continued strength as packers move additional supplies will be telling, as additional gains help affirm that an interim cash low could be near.
Technical analysis: December lean hog futures rallied sharply today, breaking out of a bull flag on the daily bar chart. Bulls maintain full control of the technical advantage, targeting resistance at $74.275, backed by the psychological $75.00 level then the 200-day moving average at $75.15. Bears are seeking to break support at $73.05, with backing from $71.75.
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 rose 75 cents to $174.925 and near mid-range. January feeder cattle gained $1.875 at $228.30 and nearer the session high.
Fundamental analysis: The cattle futures markets saw short covering today after prices last Friday hit multi-month lows. However, buying interest was limited by still-bearish technical charts and weakening cash market fundamentals. Solid gains in corn and soybean/meal futures today also somewhat dented bullish enthusiasm in the feeder cattle futures market.
Cash cattle prices dropped last week amid the big sell off in the cattle futures markets. Last week’s average cash trade came in at $179.91, down $4.98 from the week prior. We look for cash cattle prices this week to again trade weaker. This Friday afternoon’s monthly USDA cattle-on-feed report will likely push active cash trading into late Friday. The noon report today showed Choice boxed beef cutout value fell 48 cents to $299.98, while Select grade rose $1.74 to $269.16, taking the Choice/Select spread to $30.82. Movement at midday was light at 47 loads.
Seasonal weakness is likely to continue to pressure cash cattle and futures prices for the next few weeks, though prices usually see a rebound following the Thanksgiving holiday, as retailers buy beef for year-end retail features.
Technical analysis: The live and feeder cattle futures bears have the solid overall near-term technical advantage. A seven-week-old downtrend is in place on the daily bar chart for live cattle futures. The next upside price objective for the live cattle bulls is to close February futures above solid resistance at $183.00. The next downside technical objective for the bears is closing prices below solid technical support at $170.00. First resistance is seen at $177.00 and then at $179.00. First support is seen at last week’s low of $173.65 and then at $172.00. A steep two-month-old downtrend is in place on the daily bar chart for January feeder cattle futures. The next upside price objective for the feeder bulls is to close January futures prices above technical resistance at $237.50. The next downside price objective for the bears is to close prices below solid technical support at $220.00. First resistance is seen at $230.00 and then at $232.00. First support is seen at today’s low of $225.25 and then at last week’s low of $223.625.
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.
