Livestock Analysis | February 12, 2024
Price action: April lean hog futures fell 2.5 cents before settling at $81.125, near mid-range.
Fundamental analysis: Lean hogs pivoted around unchanged as the outlook is uncertain in cash fundamentals, leading to choppy futures trade. The CME lean hog index fell 40 cents to $73.60 today (as of Feb. 8), marking back-to-back declines for the first time since late December when the index was posting a seasonal bottom. The preliminary calculation puts the index up 10 cents to $73.70 tomorrow, though futures failed to follow the index to the upside, despite the February contract trading at a discount to the index. That signals traders belief that the recent pullback in the index is not finished and is likely to continue soon, considering the February contract goes off the board this Wednesday at noon.
The weakness in the index did little to dissuade strength in the wholesale market today. Cutout surged $3.47 to $89.44, once again pressing against the $90.00 mark that has enticed packers to offload supplies over the past month. Ham led cutout higher, which we expect will continue over the coming month as packers stock up for an early Easter, which will kick off the grilling season.
Technical analysis: April lean hog futures closed one tick lower after trading on both sides of unchanged. An uptrend remains on the daily bar chart, though bears have challenged bulls’ hold on the technical advantage over the last week. Resistance lies at $81.60, the 10-day moving average, with backing from $82.20 then $82.825. Meanwhile, bulls are seeking to hold support at $80.35, the psychological $80.00 mark, then last week’s low of $79.675 on additional selling.
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 80 cents to $185.925 and nearer the session low. Prices hit a three-month high early on. March feeder cattle closed up $1.675 at $248.825, near mid-range and hit a 3.5-month high early on.
Fundamental analysis: The live cattle futures market saw some routine profit-taking pressure from the speculators today, while the feeder cattle futures bulls continue to power ahead. Cash market fundamentals remain solid. The average price for cash cattle last week was $181.15, up $3.35, for the fourth week in a row of gains and the highest cash price since week ended Nov. 3. Poor packer margins could limit their willingness to bid for cattle this week. Still, we expect steady-firmer cash trade when it commences later this week. The noon report today showed Choice-grade boxed beef value rose 89 cents to $294.93, while Select grade rose $1.58 to $286.66, narrowing the Choice/Select spread to $8.27. Movement at midday was light at 49 loads.
Upbeat consumer attitudes will also continue to support better demand for beef at the meat counter. U.S. stock indexes hit record highs again today. Also, a consumer survey from the New York Federal Reserve today showed positive consumer attitudes and expectations for receding inflation.
Technical analysis: The live and feeder cattle futures bulls have the firm overall near-term technical advantage. Nine-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 $190.00. The next downside technical objective for the bears is closing prices below solid technical support at $180.00. First resistance is seen at today’s high of $187.575 and then at $189.00. First support is seen at $185.00 and then at $184.00. The next upside price objective for the feeder bulls is to close March futures prices above technical resistance at $255.00. The next downside price objective for the bears is to close prices below solid technical support at $240.00. First resistance is seen at today’s high of $249.90 and then at $251.00. First support is seen at $246.00 and then at $245.00.
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.
