Livestock Analysis | January 25, 2024
Price action: Hog futures seemed to follow other markets, particularly cattle futures, higher Thursday. Nearby February gained 40 cents to $74.30, while most-active April climbed 52.5 cents to $82.55.
Fundamental analysis: The hog and pork complex is continuing its seasonal advance, but the news from the cash and wholesale markets wasn’t all that strong. For example, after officially surging 64 cents to $69.39 on Tuesday, Wednesday’s preliminary quote for the lean hog index rose just 28 cents to $69.67. And, as is often the case, pork cutout set back Wednesday afternoon after jumping to $90.22 at midsession. It rose significantly again this morning, rising $1.51 to $90.37, but seemingly needs strength in cuts other than bellies to sustain the seasonal rally. We particularly think vigorous ham market gains will be required to justify the premium now built into April hog futures.
Today’s futures advance likely benefitted from strength spilling over from surging live cattle and feeder futures as well. The latter almost surely derived considerable strength from sinking soy markets and corn slippage, whereas climbing equity markets and crude oil futures likely encouraged live cattle bulls to anticipate robust beef demand. Choice beef prices have dropped after topping $300.00 Tuesday.
Technical analysis: Bulls clearly hold the short-term technical advantage in April hog futures, especially after today’s rise pushed the contract well above its 200-day moving average near $81.85. That level now marks initial support, with backing from Tuesday’s high at $80.90, the psychological $80.00 level then the 100-day moving average near $79.45. Look for initial resistance between the November high at $82.80 and today’s high at $82.85. A breakout above that range would have bulls targeting the psychological $85.00 level, then the September high at $86.05.
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: April live cattle rose $2.35 to $180.70. March feeder cattle gained $4.40 at $238.175. Both markets closed near their daily highs and hit 2.5-month highs.
Fundamental analysis: The live and feeder cattle futures markets were boosted today by technical buying as their near-term chart postures are firmly bullish. Today’s U.S. GDP report came in stronger-than-expected and the major stock indexes this week hit record highs—both suggesting improving consumer confidence that will likely lead to continued good demand for beef at the meat counter.
Our cash cattle sources reported initial cash trade took place around $174.00 in Texas Wednesday. That would be up $1.00 from last week’s activity in Texas. While activity has so far been limited in other areas, we expect cash prices will be at least $1.00 higher than last week’s average of $173.76. Packer margins are in the black, suggesting they can pay up to get supplies. Today’s noon report showed wholesale beef values mixed, with Choice grade dropping another $1.66 to $297.84, while Select grade rose 68 cents to $287.92, narrowing the Choice/Select spread to $9.92. The narrowing spread reflects a strong seasonal tendency to narrow, but market-ready supplies remain tight, with animals likely still recovering from last week’s heavy snow and bitter cold in the Midwest. Movement at midday was 67 loads. For the week ended Jan. 18, USDA reported U.S. beef export sales of 22,400 MT for 2024.
January feeder futures expired at noon today, going off the board 20 cents higher at $232.025. That reflects Wednesday’s strong advance by the feeder index to $230.21, as well as apparent expectations for another jump this afternoon, since futures cash-settle against the index.
Technical analysis: The live and feeder cattle bulls have the firm overall near-term technical advantage and gained more power today. Six-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 $185.00. The next downside technical objective for the bears is closing prices below solid technical support at $176.00. First resistance is seen at $181.00 and then at $182.00. First support is seen at $179.00 and then at today’s low of $177.425. The next upside price objective for the feeder bulls is to close March futures prices above technical resistance at $244.00. The next downside price objective for the bears is to close prices below solid technical support at this week’s low of $228.75. First resistance is seen at $239.00 and then at $240.00. First support is seen at $236.00 and then at $234.00.
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.
