Livestock Analysis | January 29, 2024
Price action: April lean hogs closed 17.5 cents higher to $83.425, near session highs. Expiring February futures rallied 35 cents higher to $75.275.
Fundamental analysis: Lean hog futures gapped lower on this morning’s open but strong gains in cash fundamentals limited losses. Futures continue to show impressive strength. Prices continued to surge higher last week despite wavering gains in the CME lean hog index. The index rose 23 cents to $69.90 today and the preliminary calculation puts the index up another 68 cents to $70.58 tomorrow (as of Jan. 26), which would mark the highest quote since last November. Futures have quickly surged above the index, clearly evidenced by the $4.695 premium that February futures currently hold to the index. That likely limited gains this morning, considering the February contract goes off the board on Feb. 14. The steep $12.845 premium that April holds to the index shows the inherit bullish bias that traders hold in hog futures, which has been supported by continued relative strength in wholesale pork prices. Cutout fell 2 cents at midsession to $89.49, though movement was an impressive 180.4 loads. Steep losses in butts were partially offset by strength in ribs and bellies.
Technical analysis: April lean hog futures closed modestly higher, though bulls showed an impressive feat at closing near session highs following a gap lower this morning. Bulls continue to hold the technical advantage. Resistance stands at $84.00 with little backing until the psychological $85.00 mark, then $85.50. This morning’s low at $82.60 stands as initial support, with further backing from $81.725, then $80.90.
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 lost 45 cents to $181.225. March feeder cattle closed down $1.075 at $238.625. Both markets closed nearer their session lows and hit 2.5-month lows today.
Fundamental analysis: The live and feeder cattle bulls came out of their chutes strong today and hit new for-the-move highs but faded down the stretch on profit taking from recent gains. A risk-off tone in the general marketplace today, following three U.S. soldiers dying and many more injured from a Houthi drone attack in Jordan also worked to prompt some late selling pressure in cattle futures.
Still, cattle futures traders expect cash market fundamentals to remain solid this week. Last week’s average cash cattle trading price was $175.44, up $1.68 from the previous week and the highest average weekly price since late November. While packers have fresh contract supplies available as the calendar turns to February later this week, we still look for higher cash cattle trade late this week. Packing plants are trying to normalize slaughter schedules following holiday- and weather-related delays and cutbacks. The noon report showed wholesale beef prices mixed today, with Choice-grade cutout value rising 97 cents to $301.50, while Select grade lost 20 cents to $288.93, taking the Choice/Select spread to $12.57. Movement at midday was light at 29 loads.
Traders are awaiting USDA’s semi-annual cattle inventory report that is due out Wednesday afternoon.
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.
