Livestock Analysis | December 4, 2023
Price action: February lean hog futures rallied 70 cents before ending the day at $70.80, while nearby December futures lost 55 cents to $68.05.
Fundamental analysis: Lean hog futures struggled garnering much momentum either way in a volatile session, though favored the upside at the close. While cash prices have continued to show seasonal weakness, traders are uncertain of the outlook following the December contract’s expiration, as February futures have traded as a premium and a discount to the CME lean hog index over the past week. The index fell 77 cents to $70.58 today (as of Nov. 30) and is expected to fall another 74 cents to $69.84 tomorrow (as of Dec. 1).
Wholesale pork prices rose from Friday’s for-the-move low at midsession. Overall cutout values rose $1.36 to $84.91 with gains seen in each individual cut. Pork production is likely to peak in the near future, but high production is likely to limit gains seen in the wholesale market. Movement totaled over 300 loads every day but Monday last week and was a firm 155.21 loads at midsession, indicating packers have a significant amount of pork to move, which will likely keep wholesale pork prices near recent lows.
Technical analysis: February lean hog futures fell on this morning’s open though buyers underpinned the market. Bulls struggled breaking above Friday’s high of $72.00, which will remain resistance. Additional resistance lies at $71.025 on the way, while bulls are targeting a daily close above the 40-day moving average at $73.35. Support lies at $69.80, backed by today’s intraday low of $69.50. Further selling targets $69.00, with sellers ultimately targeting last week’s low of $65.80.
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 December.
Price action: February live cattle fell $2.05 to $167.075, near the session low and hit an 11-month low. January feeder cattle closed down $3.90 at $210.525, near the session low and hit a contract low.
Fundamental analysis: More chart-based selling pressure was seen in the live and feeder cattle futures markets to start the trading week, as technicals are fully bearish and there are no strong, early chart clues that market bottoms are close at hand. Cash cattle fundamentals are continuing to deteriorate. Sales of live cattle last week ranged from $174.00 to $175.00 in all regions but mostly at $175.00. Dressed sales were mostly at $275.00. Last week’s average cash cattle trade price was $174.45, down $2.32 from the week prior. The noon report today showed Choice grade beef cutout value down $1.82 at $295.64, while Select grade was down $1.63 to $263.86. Movement at midday was good at 80 loads. The increased beef movement suggests retailers are gearing up for year-end beef features. Spot beef movement was solid last week, with loads totaling 749, including 159 loads Friday. The Choice-Select spread is presently $31.78, which is still historically wide for this time of year and suggests still-tighter supplies of market-ready animals in the feedlots.
On the positive side, consumer demand for beef remains good despite still-elevated prices at the meat counter. The recent rally in the U.S. stock market and notions of steady to even declining interest rates in the coming months should work to keep consumer attitudes upbeat. That suggests continued better demand for beef.
Technical analysis: The live and feeder cattle futures bears have the solid overall near-term technical advantage. Ten-week-old downtrends are in place on the daily bar charts for live cattle and feeder cattle futures. The next upside price objective for the live cattle bulls is to close February futures above solid resistance at $175.00. The next downside technical objective for the bears is closing prices below solid technical support at the contract low of $160.825. First resistance is seen at today’s high of $170.00 and then at last Friday’s high of $172.425. First support is seen at today’s low of $166.725 and then at $165.00. The next upside price objective for the feeder bulls is to close January futures prices above technical resistance at last week’s high of $223.575. The next downside price objective for the bears is to close prices below solid technical support at $200.00. First resistance is seen at today’s high of $214.525 and then at $217.50. First support is seen at today’s contract low of $209.15 and then at $208.00.
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 December.
