Livestock Analysis | November 21, 2023
Price action: February lean hogs dropped $2.725 to $72.325, nearer the session low and hit a three-week low.
Fundamental analysis: Lean hog futures prices tumbled today on chart-based selling pressure as the near-term technical posture for February hogs deteriorated significantly today. Cash hog and pork market fundamentals have also eroded recently. The latest CME lean hog index is down another 57 cents to $74.52 as of Nov. 17, a new seasonal low. The preliminary calculation for tomorrow puts the index down an additional 34 cents to $74.18 tomorrow (as of Nov. 20). The noon report today showed pork cutout value up 73 cents to $86.82, led by gains in picnics and bellies. Movement at midday was 167.36 loads.
The lean hog market bulls can still point to good consumer demand for pork, amid historically elevated beef prices, which should keep a floor under present hog and pork price levels. Hog slaughter will likely rise as the industry gets back to work after the Thanksgiving holiday, with the weekly total probably reaching its annual peak during the week ending Dec. 16. However, wholesale ham demand is likely to be strongest in mid-December, ahead of the holidays.
Technical analysis: The lean hog futures bears have gained the overall near-term technical advantage. Prices are now trending lower on the daily bar chart. The next upside price objective for the hog bulls is to close February prices above solid chart resistance at this week’s high of $76.40. The next downside price objective for the bears is closing prices below solid technical support at the October low of $69.175. First resistance is at $74.00 and then at today’s high of $74.90. First support is seen at $72.00 and then at $71.00.
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: December live cattle futures fell 47.5 cents to $175.00 and settled near mid-range. January feeder cattle futures dropped $1.525 to $228.325, closing nearer the session low.
Fundamental analysis: Live cattle futures struggled to garner much momentum either way in choppy trade, though the downside remains limited from last week’s low. Prices have traded largely sideways awaiting a catalyst from the cash market. Futures and cash trade alike did not react much to Friday’s Cattle on Feed report as much of the results were already priced in the market. Outside markets did little to affect cattle futures today, as grains favored the upside but saw limited volatility, equities traded near unchanged alongside the U.S. dollar index and crude oil futures faced mild selling pressure. Trade the remainder of the week is likely to remain subdued ahead of the holiday and shortened hours as traders limit their risk exposure into the weekend.
Wholesale beef prices faced mild pressure at midsession, as Choice slipped 24 cents to $295.51 and Select fell 15 cents to $270.80. Wholesale beef should be supported into next weekend as retailers purchase specials for the first weekend of December.
Feeder cattle continue to face selling pressure despite relative weakness in the corn market. January feeder futures hold a premium to the cash index, pointing to traders’ belief that the downside will remain limited over the next two months.
Technical analysis: December live cattle futures face mild selling pressure on the day, leaving the technical advantage to the bears. Prices were supported by last week’s support zone at $174.20. Further selling is likely to find support at the Nov. 10 low of $173.15. Bulls are looking to close prices above the 10-day moving average, currently at $176.47, backed by $177.00 then last week’s high of $177.775.
January feeder cattle futures continue lower in a two-month long downtrend on the daily bar chart. Bulls are eyeing a close above the 10-day moving average, currently at $230.00, backed by downtrend resistance at $232.20. Bears are seeking to break support at $228.50 then $225.775, with firmer backing from the Nov. 10 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.
