Livestock Analysis | December 26, 2023
Price action: February lean hog futures fell $2.05 to $69.30, nearer session lows.
Fundamental analysis: Lean hog futures fell under heavy selling pressure following Friday’s bearish Hogs & Pigs Report. Hog numbers apparently being more plentiful than anticipated quickly sent the market lower, which has been looking for a seasonal low. A bottom rarely comes between Christmas and New Year’s; this year appears to be no exception. The CME lean hog index was officially quoted down 44 cents to $66.25 today (as of Dec. 21), while the preliminary calculation puts the index down another 66 cents to $65.59 tomorrow. The continued weakness in the index is likely to weigh heavily on February futures, which continue to trade at a substantial premium to the index. Wholesale pork prices were firmer at midsession, apparently supported by relatively low pork inventories, pointed out in Friday’s USDA Cold Storage Report. Cutout values rose $1.05 to $83.26, led higher by bellies.
Technical analysis: February lean hog futures faced heavy selling throughout the session, negating last week’s potential bull flag on the daily bar chart. Fundamental based selling took prices below support at $70.41 and $70.20, which will now stand as resistance, with further backing from the 40-day moving average, currently at $71.45, which capped gains last week. Bulls are seeking to hold support at $68.975 then $67.325 on further selling pressure.
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 January.
Price action: February live cattle rose $1.875 to $170.40 and near the session high. March feeder cattle gained 17 1/2 cents to $224.575, also near the daily high.
Fundamental analysis: The cattle futures markets today were supported by bullish outside market forces that included a rally in the U.S. stock market as well as solid gains in crude oil prices that prompted some better speculator buying interest. Cattle traders brushed aside a mildly bearish USDA Cattle-on-Feed Report released last Friday afternoon. The report showed the Dec. 1 large feedlot (1,000-plus) head inventory increased 2.7% from one year ago, which was just above market expectations. November placements of cattle into feedlots declined 1.9%, whereas traders anticipated a 3.8% decline. November marketings fell 7.4% compared with the expected 6.7% drop. Meantime, USDA’s cold storage report showed U.S. beef stocks totaled 454.7 million lbs., up 9.0 million lbs. (2.0%) from October.
The noon beef report today showed Choice-grade cutout value down 48 cents at $292.45, while Select grade was down 45 cents at $260.70. Movement at midday was light at 36 loads. The Choice-Select spread at midday was $31.75. The five-area direct average cash steer and heifer price last week was $170.57. Holiday-shortened slaughter schedules are likely to weigh on cash prices this week, though packers still appear to be short-bought.
A strong winter storm system in the Plains states gave some support to the cattle futures markets today. World Weather Inc. said livestock stress and transportation problems are expected due to snow and blizzard conditions in Nebraska, northern Colorado, and northwestern Kansas.
Technical analysis: February live cattle prices scored a bullish “outside day” up on the daily bar chart today. The bears still have the overall near-term technical advantage. However, a three-month-old downtrend on the daily bar chart has stalled out. Recent gains begin to suggest a market bottom is in place. The next upside price objective for the 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 last week’s high of $171.00 and then at $172.00. First support is seen at today’s low of $167.35 and then at $166.00.
March feeder cattle bears have the overall near-term technical advantage. However, a three-month-old downtrend on the daily bar chart has been negated. Recent gains suggest a market bottom is in place. The next upside price objective for the feeder bulls is to close March futures prices above technical resistance at $230.00. The next downside price objective for the bears is to close prices below solid technical support at the contract low of $210.625. First resistance is seen at last week’s high of $226.85 and then at $228.00. First support is seen at today’s low of $221.10 and then at $220.00.
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 January.
