Livestock Analysis | January 4, 2024

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: Firm wholesale prices and fresh cash strength sparked big gains in hog futures Thursday. Nearby February led the gains, jumping $3.75 to $69.05.

Fundamental analysis: As indicated yesterday, the hog index looked set to turn higher when officially quoted (for Tuesday) this morning. That was indeed the case, with the index stated 14 cents higher at $65.19. Moreover, the preliminary calculation for Wednesday’s quote surged 67 cents to $65.86. The size of that gain likely persuaded traders much more of the same is coming after they took premium out of the nearby contract with Tuesday’s big breakdown.

We suspect traders are also being encouraged by the wholesale market. That is, while it isn’t climbing, it is stubbornly refusing to turn significantly lower. It fell $2.22 to $82.78 Wednesday, but rebounded to $84.93 at midsession today, once again on morning pork belly strength. That firmness makes cash hog prices under $70.00 look undervalued. Traders are probably reluctant to pursue the upside very aggressively at this point, particularly when they recall the sustained weakness seen in early 2023, as well as the industry’s persistent 2023 tendency to produce more hogs and pork than indicated by the latest Hogs & Pigs report from the USDA. If/when that pattern changes, which seems much more possible in the wake of the USDA’s huge upward revisions on the December report, the market may prove able to sustain cash gains. We believe consumer demand is proving much stronger after grocers cut retail prices last summer, which may also translate into higher prices.

Technical analysis: Bears still own the short-term technical advantage in February hog futures, but today’s jump clearly weakened their hold. The close failed to decisively penetrate the contract’s short-term 10-day moving average near $69.01. A breakout above that point would have bulls targeting the psychological $70.00 level and the 40-day moving average near $70.91. Look for initial support around last Friday’s low of $67.65, with backing from the Dec. 13 low of $66.225 and the Nov. 28 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 January. 

 

 

Cattle

Price action: February live cattle fell 72 1/2 cents to $171.125 and near mid-range. March feeder cattle closed down $1.375 at $225.65 and nearer the session low.

Fundamental analysis: There is still some trader and investor trepidation in the general marketplace late this week, evidenced by this week’s sell-off in the U.S. stock indexes. The “risk-off” attitudes today limited buying interest in the cattle futures markets.

Weaker wholesale beef values this week are also bearish for cattle futures. The noon report today showed Choice grade boxed beef cutout value fell another $1.06 to $276.97, while Select grade rose $1.37 to $260.22, narrowing the Choice/Select spread to $16.75. Movement at midday was decent at 90 loads.

Cash cattle trading activity this week started around $175.00 in the far northern market amid light volumes. USDA reported there were officially 2,601 head of choice steers traded at $174.96 on Wednesday. Asking prices are reportedly $177.00 in the southern Plains. Bulls are hoping for a continued seasonal rally in futures and cash the first quarter. However, steer weights set a record at 941 pounds per head in mid-December, suggesting feedlots marketings are not current.

Cattle traders will be monitoring wintry weather in the Plains states in the coming days. World Weather Inc. today reported a more active weather pattern begins today as a rain and snow event moves into the region from the southwestern U.S. This will promote the greatest snow accumulations from areas in and near the Oklahoma Panhandle into south-central Kansas. Some of this snow will then melt before the next, bigger, storm system moves into the region and causes potential blizzard conditions Monday into early Tuesday. “Both of these events will likely cause travel delays and livestock stress. However, the Monday and Tuesday event will have the greatest impact,” said the forecaster.

Technical analysis: The live and feeder cattle futures bears have the overall near-term technical advantage. However, price uptrends are in place on the daily bar charts and recent gains suggest market bottoms are in place. The next upside price objective for the live cattle bulls is to close February futures above solid resistance at $178.00. 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 this week’s high of $172.65 and then at $174.00. First support is seen at $170.00 and then at this week’s low of $169.00. The next upside price objective for the feeder bulls is to close March futures prices above technical resistance at $235.00. The next downside price objective for the bears is to close prices below solid technical support at the contract low of $217.50. First resistance is seen at this week’s high of $227.925 and then at $229.00. First support is seen at $225.00 and then at this week’s low of $222.95.

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.

 

 

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