Livestock Analysis | January 8, 2024

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: February lean hog futures rallied 60 cents to $70.60, while deferred contracts saw greater gains.

Fundamental analysis: Despite broad weakness across commodities, lean hog futures rallied for the third consecutive session. Heavy selling in crude oil futures limited risk appetite in commodities today, which helped soybeans close lower for the sixth time in the last seven sessions. While the CME lean hog index fell one cent to $65.85 today, the preliminary calculation puts the index down another 11 cents to $65.74 tomorrow (as of Jan. 5). That weakness did little to deter lean hog futures bulls today, as traders apparently continue to believe that a seasonal low is near. Trade in futures is likely to be largely sideways, as to not build too large of a premium to the lean hog index as uncertainty remains in the cash market. The continued relative strength in wholesale pork prices, which rose $1.04 to $85.24, likely gives bulls further confidence that a nearby seasonal low could be in place. Movement continues to be firm, indicating robust grocer demand, as loads totaled 183.3 this morning.

Technical analysis: February live cattle futures surged to the highest level in two weeks, though bears continue to hold the near-term technical advantage. Bulls are seeking to overcome resistance at $71.35 then $71.95, with a daily close above $72.50 signaling an interim low could be in place. Meanwhile, bears are looking to take out support at the psychological $70.00 level, $69.35, then $67.975 on a resumption lower.

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 62 1/2 cents to $169.95 and near the session low. Prices hit a five-week high early on. March feeder cattle closed up 92 1/2 cents at $225.075 and near mid-range.

Fundamental analysis: The live cattle futures market lost ground in late trading, after posting modest gains for much of the session. A big drop in crude oil prices today likely limited speculator buying interest in live cattle. Feeder cattle futures saw decent gains today as March corn futures fell to a new contract low.

Cash cattle prices rose last week, which should limit seller interest in live cattle futures, especially since cash prices are above futures. Last week’s average cash cattle trading price was up $1.77 at $174.01. Higher cash cattle trade is likely this week, but wintry weather in the central U.S. and Plains will play a role in cash negotiations this week. With packer margins deep in the red, they will try to manage near-term slaughter needs as best they can without having to aggressively bid for supplies. The noon report today showed Choice grade boxed beef prices rose $1.18 at $278.34, while Select grade fell 10 cents to $259.43. Movement at midday was 55 loads. The Choice-Select spread is presently $18.91. 

Cattle traders are keeping a very close eye on a major winter storm hitting the central U.S. World Weather Inc. today said “significant blizzard conditions are expected today from the western Oklahoma Panhandle and southeastern Colorado through western Kansas and possibly into central Kansas. What makes today’s blizzard particularly significant will be how strong the winds are. Some wind gusts as strong as 55 to 70 mph are expected, with the snow which will cause whiteout conditions and make travel potentially impossible in some areas. Livestock stress will also be high as a result.”

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 $166.00. First resistance is seen at $171.00 and then at today’s high of $173.25. First support is seen at last week’s low of $169.00 and then at $168.00. 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 last week’s high of $228.125 and then at $229.00. First support is seen at last week’s low of $222.95 and then at $221.10.

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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