Livestock Analysis | January 18, 2024

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: Hog futures traded mixed Thursday, with nearby February dipping 35 cents to $71.10.

Fundamental analysis: Today’s daily slaughter report stated the Thursday kill at 489,000 head, which marked a 54,000 head (12.5%) jump from the same day last year. That left the four-day total at 1.810 million head, 17,000 head (1.0%) below the year-ago figure. These numbers suggest wintry conditions are affecting the hog/pork industry much less than was the case late last week and early this week. As usual, the weekend slaughter totals will go far toward defining the current situation. The USDA’s December hog report implied hog supplies would still be running about 1% over last year at this point, with the numbers generally matching those from early 2023 during the February-May period.

The current situation still seems supportive, as indicated by the hog index for Tuesday matching yesterday’s calculation at $67.34 (up 49 cents), with today’s preliminary figure for Wednesday rising another 53 cents to $67.87. Moreover, pork cutout continues climbing, adding $1.85 to $89.91 at midsession. This marks its highest quote since it spiked to $91.61 on Nov. 6, then reversed. The extended slaughter cutbacks of the past few weeks, with the weather-related reductions of the past week coming on the heels of those made over the holidays, are likely providing sustained support. That suggests increased vulnerability to cash and wholesale price weakness in the days ahead. But we still think comparatively low retail pork prices (versus those for most beef cuts and whole chickens) are provoking a robust demand response from consumers.

Technical analysis: Bulls still own the short-term technical advantage in February hog futures. Bears were able to push prices below initial support at the contract’s 10-day moving average near $71.15, but could not force a close significantly below that level. Expect added support at the psychological $70.00 level, with reinforcement from the 20- and 40-day moving averages near $70.03 and $69.96, respectively. Today’s high marked initial resistance at $71.95, with a breakout above that point likely having bulls targeting last week’s high of $73.05. Sustained strength would open the door to a test of the psychological $75.00 level, then $80.00.

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: April live cattle rose $2.025 to $177.65. March feeder cattle gained $2.775 at $232.55. Both markets closed nearer their session highs and hit two-month highs.

Fundamental analysis: Technical buying was featured in the live and feeder cattle futures markets today as solid gains suggest the price uptrends in both markets will be extended. A recently stronger wholesale beef market is fundamentally supportive. The noon report today showed beef cutout values mixed, with Choice grade losing $1.54 to $296.91, while Select grade rose 23 cents to $283.25. Movement at midday was 67 loads. The Choice-Select spread is presently $13.66. Cash cattle trade has been slow to develop this week and will likely be quieter until after Friday’s USDA Cattle on Feed Report.

More bitter cold and snow in the Midwest Friday into the weekend could impact animals’ performance in the near term and could also impact feedlot operators’ marketings early next week. However, a warm-up in the Midwest is expected by early next week. 

Traders are awaiting USDA’s cattle-on-feed report Friday afternoon. A Reuters poll showed analysts on average expect that as of Jan. 1, cattle on feed will be 102.1% of last year at the same time. Placements are seen at 95.41% and marketings are seen at 99.31%, respectively, of last year.

Technical analysis: The live and feeder cattle futures bulls have gained the overall near-term technical advantage. Five-week-old price uptrends are in place on the daily bar charts. The next upside price objective for the live cattle bulls is to close April futures above solid resistance at $182.00. The next downside technical objective for the bears is closing prices below solid technical support at $172.50. First resistance is seen at $179.00 and then at $180.00. First support is seen at $176.00 and then at $175.00. The next upside price objective for the feeder bulls is to close March futures prices above technical resistance at $238.00. The next downside price objective for the bears is to close prices below solid technical support at $225.00. First resistance is seen at today’s high of $233.45 and then at $235.00. First support is seen at today’s low of $229.475 and then at this week’s low of $226.875.

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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