Livestock Analysis | December 28, 2023
Price action: February lean hog futures fell $1.425 to $68.45, settling nearer session lows.
Fundamental analysis: Lean hog futures turned lower as concerns remain over prolonged weakness in the cash market. After rising 12 cents to $65.71 today, the CME lean hog index reversed lower once again, with the preliminary calculation putting the index down another 14 cents to $65.57 tomorrow (as of Dec. 27), which would mark a fresh seasonal low. February futures continue to trade at a hefty premium to the index, leaving room for sustained weakness in futures if the index continues to fall. Weakness this week was not unexpected, as the hog market rarely puts in a seasonal bottom during the week between Christmas and New Years. Wholesale pork prices continue to show relative strength, especially impressive as movement remains high, as loads totaled 148.77 at midsession. Cutout rose 25 cents to $82.77, led higher by a $4.75 jump in loins.
Technical analysis: February lean hog futures gave up all of Wednesday's gains and then some as volatility continues to increase due to uncertainty surrounding the market. Prices have been trending lower for two weeks now as bears target significant support at $66.50 with additional support at $67.75 and $68.00 on the way. Resistance stands at the psychological $70.00 mark, then the 40-day moving average at $71.25.
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 fell 35 cents to $168.925, ending below the 10-day moving average, while March feeders plunged $2.2750 to $223.125 and closed near the session low.
Fundamental analysis: Cattle futures extended lower for the second straight session, weighed down by wholesale weakness and sluggish cash cattle trade development, though losses were limited by support at the 20-day moving average. Lacking cash cattle trade and two weeks of shortened slaughter will hover over futures, as packers wait for fresh supplies upon the flip of the calendar. However, while slaughter numbers in the past week were 28,000 smaller than the previous week, the number exceeded year-ago by 69,000 head, with December 2023 slaughter notably outpacing year-ago. Meantime, the noon report showed wholesale values sliding lower, with Choice dropping $4.85 to $286.63, while Select dipped 64 cents to $259.68, narrowing the Choice/Select spread from the previous $31-plus to $26.95.
Technical analysis: February cattle pushed below the 10-day moving average of $169.21 but found support around the 20-day moving average of $168.23, which will now serve as initial support. A breach of the 20-day will then face support at $167.79, then at $166.66 and the Dec. 7 low of $162.40. Returned strength, however, will now find resistance at the 10-day moving average, then at $170.41, $171.54 and $172.28.
March feeders succumbed to technical pressure at the 40-day moving average of $225.72 and ultimately finished the session below the level along with the 10-day of $223.62. Initial support will now serve at $221.66, then at the 20-day moving average of $220.11 and again at the Dec. 7 low of $210.625. Initial resistance will now serve at the 10- and 40-day moving averages, then at $226.86, $228.32 and $229.46.
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.
