Livestock Analysis | January 11, 2024
Price action: Hog futures resumed their recent climb, with nearby February gaining 52.5 cents to $72.60.
Fundamental analysis: In contrast to the sustained weakness seen in early 2023, the hog and pork complex seems to be following the traditional pattern of strength at this time of year. We still attribute much of the complex’s sustained upward march to grocers continuing to pass along reduced cash and wholesale prices to consumers, after maintaining retail prices at greatly elevated levels through the first few months of 2023. Hog supplies are likely still running above year-ago, although this week’s snow and anticipation of next week’s arctic temperatures have packer slaughter operations in a state of flux. For example, Monday-Thursday slaughter totaled 1.809 million head, whereas the comparable year-ago figure reached 1.925 million.
Nevertheless, with Wednesday’s final reading for pork cutout reaching $86.66, which was well above the comparable year-ago figure at $81.73, its apparent consumer demand has greatly improved from one year ago. And while today’s midsession quote fell $2.47 (to $84.19) back into the $84.00-$85.00 range, this serves as a reminder of the relative cheapness of current hog prices. That is, the hog index was quoted at $75.96 on Jan. 10, 2023, whereas the official quote for Jan. 9 was stated at $66.46 this morning and today’s preliminary calculation for Wednesday rose another 31 cents to $66.77. Again, we expect grocers to price Easter hams much more aggressively this year (with the holiday’s early arrival on March 31 also compressing the time the industry has to prepare and move those hams), which we believe will translate into sustained hog/pork strength into spring.
Technical analysis: Bulls own the short-term technical advantage at this point, especially after smashing pivotal resistance at the contract’s 40-day moving average, now near $70.38, on Tuesday. Initial support at today’s low of $71.425 is backed layers of support extending from the 40-day moving average to the psychological $70.00 level and the 20- and 10-day moving averages near $69.79 and $69.33, respectively. Today’s high of $73.05 matched Tuesday’s top, reflecting stiff resistance at that level. That may reflect the downtrend drawn across the contract’s September and November highs. We have the trendline standing at $73.20 tomorrow. A push above that point would have bulls targeting $75.00, then the November high at $77.70.
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 $1.05 to $171.80 and nearer the session high. March feeder cattle closed up $1.275 at $227.40 and nearer the session high.
Fundamental analysis: Cattle futures prices rose today in apparent response to the bullish near-term aspect of a major winter storm in the Midwest disrupting marketing of cattle and stressing the animals. World Weather Inc. today said a powerful winter storm system will impact the Midwest late today into Saturday, with snow and travel delays expected in a large part of the region before precipitation becomes less frequent and lighter Sunday through Jan. 25. A surge of artic air will impact the region Saturday into early next week. Strong winds will accompany the snow, creating blizzard-like conditions in much of the region.
Traders at midday Thursday were still awaiting active cash cattle trading activity this week. Cash cattle are expected to trade higher for the fourth consecutive week. USDA Wednesday reported 2,361 head of 80% Choice steers traded at $174.87 in Iowa-southern Minn. Extreme winter weather will very likely dictate higher cash prices this week. Cattle will likely be lighter and grade lower next week due to snow followed by arctic cold. The noon report showed wholesale beef values rose again today, with Choice grade gaining $2.52 to $285.59, while Select rose $3.05 to $269.99, narrowing the Choice/Select spread to $15.60. Movement at midday was 64 loads.
USDA this morning reported U.S. beef export sales of 12,200 MT for 2024. Net sales reductions of 900 MT were carried over from 2023.
Technical analysis: The cattle futures bears still 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 $175.00. The next downside technical objective for the bears is closing prices below solid technical support at $166.00. First resistance is seen at this week’s high of $173.25 and then at $174.00. First support is seen at this week’s low of $169.25 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 the January high of $228.125 and then at $229.00. First support is seen at this week’s low of $223.85 and then at last 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.
