Livestock Analysis | January 16, 2024

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: Hog futures declined Tuesday with nearby February leading the way lower. A late rebound cut the loss to $1.125, with the close coming in at $70.775.

Fundamental analysis: Hog traders seemed to think the premiums built into hog futures last week were overly optimistic, which at least partially explains today’s futures losses despite supportive fundamental news. The hog index for last Friday was officially quoted seven cents higher at $66.55 this morning, while Monday’s preliminary quote rose another 30 cents to $66.85. Pork cutout did slip 17 cents to $86.89 at noon today, but that hardly seems bearish given late-December quotes around $82.00 and the fact that Monday’s quote was the highest since mid-November. Ultimately, all seems in train for the usual seasonal advance to a mid-to-late February high, especially with consumer and export demand for pork apparently holding up quite well this winter.

The drop might also be blamed on ideas hogs are backing up on farms amid the ongoing wintry weather, with slick roads and arctic temperatures keeping producers from getting hogs to the packers. We think the situation could be corrected rather quickly, but that’s not assured either. 

Technical analysis: Bulls still seem to hold the short-term technical advantage in February hog futures despite today’s setback. That largely reflects bears’ inability to force a close below the contract’s pivotal 40-day moving average near $70.16 and the late bounce. That support is backed by the 20-day moving average at $70.05, the psychological $70.00 level and the 10-day moving average at $69.96. Conversely, a close below that support area would likely have bears targeting the Jan. 5 low of $68.00, then the Jan. 3 low at $64.575. Initial resistance stands at today’s high of $71.85, with backing from the Jan. 11 high of $73.05. A breakout above that point would open the door to a test of the psychological $75.00 level.

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 futures surged $1.75 before settling at $173.125. March feeder cattle futures rallied $1.125 cents to $228.825, while nearby January futures closed 97.5 cents higher at $227.55.

Fundamental analysis: Live cattle futures surged to a seven-week high as prices continue to grind higher on the daily bar chart. Cash cattle trade sustained weakness late last week, bringing last week’s average to $173.47, which is down 54 cents from $174.01 the prior week. Cash cattle weakness did little to deter futures traders, who still see the cattle market as having marked a seasonal bottom and strength as likely to persist in the coming weeks. Cattle weights have likely marked a seasonal peak, with the recent extreme cold that is persisting through the middle of this week causing severe livestock stress, which is likely to impact quality of cattle in the short-run. As cash cattle trade was limited last week, packers will likely have to purchase additional head this week, though trade is likely to be pushed late into the week as USDA is set to release the latest Cattle on Feed Report on Friday.

Wholesale beef prices continue to show impressive strength, likely supported from last week’s reduced slaughter counts due to the winter storms. Choice cutout rose $2.73 to $294.15 at midsession. If sustained this afternoon, that would mark the highest quote since Dec. 4. Choice cutout rose $6.92 to $279.48, which would mark the highest quote since Oct. 26 if sustained. 

Persistent weakness in the corn market has helped fuel recent gains in feeder futures, though cash prices continue to limit gains in futures, as cash trade has been largely sideways for the past couple of weeks.

Technical analysis: February live cattle futures surged to a fresh for-the-move high as prices continue to grind higher. Bulls are in full control of the technical advantage. Resistance stands at $173.475 with significant backing from $175.00. Meanwhile, bulls are looking to hold prices above the 40-day moving average at $172.15, with further backing from $171.925, then the psychological $170.00 mark.

March feeder cattle futures continue to grind sideways to higher on the daily chart, with bulls maintaining the technical advantage. Initial resistance stands at $229.30, the psychological $230.00 level, then $233.50. Bulls are seeking to hold support at $227.025, $226.75, then $225.25 on profit taking.

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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