Livestock Analysis | December 19, 2023
Fundamental analysis: The hog and pork complex is seemingly undergoing the traditional late-year decline. For example, last Friday’s official quote for the CME hog index posted a 56-cent drop to a fresh 2023 low at $66.59. Moreover, Monday’s preliminary quote dipped another 22 cents to $66.37. The wholesale market appears to be a somewhat brighter spot for the industry, although it fell $1.03 to $82.94 at midsession today. Whether that decline is sustained through today’s trading is open to question, since it has exhibited sustained strength in the $84.00-$85.00 range lately. A dive in pork belly prices amplified the drop in cutout, whereas ham prices actually rose modestly. The ham market’s refusal to crumble with the grocery industry largely having completed its purchases of holiday dinner entrees suggests consumer demand remains strong, which in turn may bode well for the 2024 outlook as well.
The industry will also learn much more about next year’s outlook at 2:00 pm Friday (12/22) when the USDA publishes its quarterly Hogs & Pigs report concerning the market hog population.
Technical analysis: Bears still hold a slight short-term technical advantage in February lean hog futures. That largely stems from the bulls’ inability to force a close above its 40-day moving average near $72.13 yesterday, as well as today’s high falling well short of that level. Today’s high marks initial resistance at $71.65, with the 40-day moving average providing strong backing. That’s reinforced by yesterday’s high at $72.45. A breakout above that range would open the door for a run at the psychological $75.00 level. Today’s low places initial support at $70.25, which is seconded by stout psychological support at $70.00. Additional support is provided by the 20- and 10-day moving averages near $69.69 and $69.31, respectively.
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 futures fell 85 cents to $168.775, settling near the session low. January feeder futures fell $1.275 to $221.90, also near session lows.
Fundamental analysis: Live cattle futures continue to face limited volatility as prices traded both sides of unchanged, though selling increased into the close. Minimal cash cattle trade has taken place thus far this week, despite reports of packers being potentially short bought. Significant trade is likely to be pushed back towards the end of the week in anticipation of this Friday’s USDA Cattle on Feed report. Volatility is likely to remain minimal as futures’ volume is dwindling into the holidays, leaving the cash market to dictate the majority of price action. The wholesale market did little to direct futures today either, as Choice cutout rose two cents to $288.95 and Select fell 30 cents to $263.42 at midsession. Movement fell on Monday near 100 loads for the day, well below the recent average, though it bounced back slightly at midsession to 68 loads.
Feeder futures fell today despite steep losses in the corn market. Feeders have led the cattle market higher in the past couple of weeks, with today’s losses doing little to dampen bulls’ spirits.
Technical analysis: February live cattle futures traded on both sides of unchanged though selling accelerated into the close. A near-term uptrend remains on the daily bar chart, though bears challenged that support into the close. Support remains at $168.75, quickly backed by the 10-day moving average at $168.50. Additional support comes in at $167.10. Meanwhile, heavy volume has occurred over the past couple of weeks at $169.00, marking that area as initial resistance. Further resistance comes in at the 20-day moving average, currently at $170.075, which capped gains Monday.
January feeder cattle futures continue to show strength relative to fats, with today’s losses doing little to damage to the short-term technical advantage that bulls hold. Additional profit taking targets support at $221.40, $220.55, then $219.475. Bulls are eyeing resistance at today’s high of $224.325, the psychological $225.00 mark, then $226.25.
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.
