Livestock Analysis | February 5, 2024
Price action: April lean hog futures dropped $1.625 to $82.20, settling nearer session lows.
Fundamental analysis: Lean hog futures gapped lower on this morning’s open and saw sustained pressure throughout the morning. The surging U.S. dollar index likely hindered bulls today, along with the overall bearish tone in the marketplace as interest rates have once again ticked higher. Traders were apparently discouraged by the steep discount that April futures have built to the CME lean hog index, especially as daily gains in the index have dropped well off last week’s jumps higher. The Index is up 41 cents to $73.12 today (as of Feb. 1) and now stands 27 above the quote at this point last year. The preliminary calculation puts the index up another 44 cents to $73.56 tomorrow. That would narrow the premium February futures hold to the index to just 84 cents, which should support futures on additional weakness.
Wholesale pork prices continue to slip, unable to garner much momentum near the $90.00 mark. Cutout fell 68 cents to $87.72, led by weakness in bellies, which happened to show relative strength on Friday. Bellies and loins were the only cuts weaker this morning, which ultimately drug cutout lower as a whole.
Technical analysis: April lean hog futures continue to fall under corrective selling from recent overbought conditions. Bulls failed to hold 10-day moving average support today, marking that as initial resistance at $82.65. Additional resistance lies at $83.75 then $84.90. Support stands at $82.075, $81.50, then the 20-day moving average at $81.10.
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 soybean meal needs covered in the cash market through February.
Price action: April live cattle fell $1.40 to $182.35 and near the session low. Prices hit a three-month high early on today but then reversed course to score a mildly bearish “outside day” down. March feeder cattle closed down $2.05 at $242.75 and nearer the session low.
Fundamental analysis: The cattle futures markets saw some routine profit-taking pressure today following recent gains. The profit taking was sparked in part by a mild “risk off” day in the general marketplace to start the trading week. The U.S. stock market saw modest selling pressure.
Cash cattle market fundamentals remain solid. Packers late last week raised cash cattle bids and bought a lot of cattle. The average cash cattle price traded last week was $177.80, up $2.36 from the week prior. We look for higher cash cattle prices when trading commences later this week, even though packers did buy a lot of cattle last week. The noon report today showed Choice-grade boxed beef cutout value unchanged at $293.08. Select grade rose 34 cents to $283.81. Movement at midday was 52 loads. The Choice-Select spread was $9.27 at midday.
Technical analysis: The live and feeder cattle futures bulls still have the firm overall near-term technical advantage. Two-month-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 $187.50. The next downside technical objective for the bears is closing prices below solid technical support at $176.50. First resistance is seen at today’s high of $184.475 and then at $186.00. First support is seen at $182.00 and then at last week’s low of $180.425. The next upside price objective for the feeder cattle futures bulls is to close March futures prices above technical resistance at $248.00. The next downside price objective for the bears is to close prices below solid technical support at $235.00. First resistance is seen at $244.00 and then at last week’s high of $246.125. First support is seen at $241.00 and then at $240.00.
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 soybean meal needs covered in the cash market through February.
