Livestock Analysis | December 27, 2023
Price action: February lean hogs rose 57.5 cents to $69.875, closing near the session high.
Fundamental analysis: A gap lower started today’s session following Tuesday’s sharp losses, though a mild rebound ensued following a test of initial support for the first time since Dec. 14. An extended sixty-cent slide in the CME lean hog index to a fresh seasonal low of $65.59 as of Dec. 22, a near three-year low, was certainly the shadow hovering over futures. However, preliminary figures show the index will rise 12 cents to $65.71. Futures movement will likely remain subdued as the new year approaches amid low trade volume and the sizable four-dollar premium the nearby February contract holds to the cash index.
The noon pork cutout value showed strength, up $1.05 to $83.17, led higher by a $5.70 gain in hams and $3.37 jump in ribs after marking a modest 9 cent drop. Movement has remained solid, even through the Christmas holiday, reflecting continued grocer demand for pork.
Technical analysis: February lean hogs were able to rally from an early test of initial support at $68.58, though the 10-day moving average of $70.07 served as an upside barrier. A consecutive test of initial support will face additional support at $67.87, then at $66.71 and the Nov. 28 low of $65.80. A breach of the 10-day, however, will face further resistance at the 40-day moving average of $71.92 and again at the 100-day moving average of $74.66.
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 futures dropped $1.125 to $169.275, while January feeder cattle futures rallied 92.5 cents to $224.475.
Fundamental analysis: Live cattle futures saw steady selling throughout the session. A lack of bullish fundamental support undercut futures on Wednesday, with technical resistance limiting gains early and reversing the market lower. Cash cattle trade has yet to take place yet this week, leading to uncertainty in the futures market. A continued bounce later this week in cash cattle would support futures gains, though packers appear to be holding out for fresh contracted supplies that come available next week. A weaker corn market did underpin feeder futures today, which could bode well for fats as the week goes on. Wholesale beef prices were mixed at midsession, with Choice cutout falling $1.72 to $291.59 and Select gaining 13 cents to $261.32. Movement firmed compared to Tuesday, though is likely to remain diminished throughout the holiday-shortened week.
Technical analysis: February live cattle futures have traded relatively sideways for the past seven sessions, with resistance at $170.40 capping gains today. That level has capped nearly all gains since the early December low. Additional resistance comes in at $171.00, then $173.07. Support comes in at $169.00, with backing from $167.55.
January feeder futures continue to outperform their fats counterpart, making a fresh five-week high today. Resistance stands at $225.60 with backing from $227.00, while support comes in near $221.65 then the psychological $220.00 level.
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.
