Livestock Analysis | November 20, 2023
Price action: December lean hog futures fell 62.50 cents before ending the day at $70.35.
Fundamental analysis: Lean hog futures continue to trade in a tight downtrend following the early November peak as cash fundamentals fail to support futures. The CME lean hog index continues to slide, falling 59 cents to $75.09 today (as of Nov 16). The index is projected to fall an additional 57 cents to $74.52 tomorrow, marking a new low on the seasonal decline. Futures have quickly respected the recent advance lower in the index, expanding the narrow spread that the index held to futures just a few short weeks ago. There are 17 trading days left before the December contract expires, while the cash index holds a $4.17 premium to the December futures. The index has fallen sharply the last couple of days following last week’s modest gains, though traders seem to think that the recent losses will not sustain through the coming three and a half weeks. They are emboldened by the strength of the wholesale market, though cutout did slip 94 cents to $87.22 today, as bellies gave up most of Friday’s gains. Wholesale pork continues to trade sideways, as it has since mid-October, suggesting strength in the cash market could underpin futures if weakness continues.
Technical analysis: December lean hog futures continue to trend lower on the daily bar chart, though losses have remained fairly limited as bulls continue to hold the near-term technical advantage. Bears are seeking to break prices below support at $70.25 on a closing basis, quickly backed by the $70.00 mark, then see little backing until $68.75. Bulls are targeting a close above converged 10, 20 and 40-day moving average resistance from $71.16 to $71.33, with firmer backing from $72.86.
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: February live cattle fell 15 cents to $176.65 and nearer the session low. January feeder cattle rose $1.35 to $229.85 and near mid-range.
Fundamental analysis: The live cattle futures market today saw mild selling amid a still-bearish near-term technical posture. Feeder cattle futures gained on short covering after recent selling pressure.
Friday’s USDA Cattle-on-Feed report was deemed neutral, showing the Nov. 1 feedlot inventory up 1.7% from year-ago, as placements rose 3.8% and marketings declined 2.5%. All three categories were close to pre-report estimates. USDA today reported last week’s five area weekly average cash cattle trade at $177.82. The noon report today showed Choice grade boxed beef cutout value up $2.28 to $296.15, while Select rose $1.71 to $274.41, widening the Choice/Select spread to $23.74. Movement at midday was decent at 69 loads. Today’s cattle slaughter was estimated by USDA at 125,000 head, the same as a week ago at this time.
Selling interest in the cattle futures markets today was limited by the recent U.S. stock market rally that saw major indexes today reach multi-week highs. The stock market rally and notions the Federal Reserve is done raising interest rates have investors and consumers heading into the holidays with upbeat attitudes and that’s a positive for beef demand.
Technical analysis: The cattle futures bears still have the solid overall near-term technical advantage. Two-month-old downtrends are in place on the daily bar charts. The next upside price objective for the live cattle futures bulls is to close February futures above solid resistance at $182.00. The next downside technical objective for the bears is closing prices below solid technical support at $170.00. First resistance is seen at today’s high of $178.725 and then at $180.00. First support is seen at $175.00 and then at the November low of $173.65.
The next upside price objective for the feeder bulls is to close January futures prices above technical resistance at $236.00. The next downside price objective for the bears is to close prices below solid technical support at $222.00. First resistance is seen at today’s high of $232.20 and then at $234.00. First support is seen at $225.00 and then at the November 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.
