Livestock Analysis | January 23, 2023

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Hogs

Advice: We advise livestock producers to cover all corn-for-feed and soymeal needs in the cash market through February.

Price action: February lean hog futures fell 25 cents to $77.575 and April hogs lost 27 1/2 cents at $85.45. Prices closed near mid-ranges today.

Fundamental analysis: Buyer interest in the lean hog futures market continues to be limited by weak cash hog market fundamentals. The latest CME lean hog index quote is down 63 cents to $72.65 (as of Jan. 19), extending the seasonal decline. Tuesday’s projected cash index price (for Jan. 20) is down 52 cents at $72.13. Traders are still looking for the seasonal bottom in the cash index. The five-day rolling average national direct cash hog price today was quoted at $70.42. The premium February futures hold to the cash index is around $5.00, which also limited buying interest in hog futures today.

Today’s noon pork report showed cutout value up $3.49 at $83.48, led by gains in hams and picnics. Movement was decent at 170.78 loads.

On the positive side, last week’s hog slaughter topped the year-ago figure by 95,000 (3.9%) but hog supplies are likely to fall below year-ago levels this week. That suggests pork prices may have fallen far enough to prompt better grocer demand at the same time the backlog of hogs created by the holiday shutdowns is ending.  Hog supplies are expected to decline seasonally and cyclically in the weeks ahead.

Technical analysis: Lean hog futures bears have the solid overall near-term technical advantage. Prices are in a steep downtrend on the daily bar chart. The next upside price objective for the hog bulls is to close April prices above solid chart resistance at $90.00. The next downside price objective for the bears is closing prices below solid technical support at the October low of $82.625. First resistance is seen at today’s high of $86.525 and then at $87.85. First support is seen at last week’s low of $84.075 and then at $83.00.

What to do: Cover all corn-for-feed and soymeal needs in the cash market through February. Be prepared to extend coverage on additional price pressure.

Hedgers: Carry all risk in the cash market for now.

Feed needs: Cover all corn-for-feed and soymeal needs in the cash market through February.

 

 

Cattle

Advice: We advise livestock producers to cover all corn-for-feed and soymeal needs in the cash market through February.

Price action: February live cattle futures rose 85 cents to $157.475 and April live cattle gained 62 1/2 cents to $160.55. Prices closed near mid-ranges today. March feeder cattle rose $2.30 to $183.275 and nearer the session high.

Fundamental analysis: Short covering and perceived bargain hunting in the cattle futures markets were featured today, following last Friday afternoon’s neutral-to-bullish USDA Cattle on Feed Report. The agency estimated 11.682 million head of cattle in large feedlots as of Jan. 1, down 355,000 head (2.9%) from a year ago, but 30,000 head above the average pre-report trade estimate. December placements fell 8.0% from a year ago, while marketings were down 6.1%.

Further gains this week may be limited as traders wait for the cash market trade to develop. We look for this week’s cash cattle trade to come in steady-firmer. Cash cattle trade last week averaged $155.32, down $1.46 from the previous week. Market-ready cattle supplies are tightening and should push cash prices higher this week.

Feeder cattle futures posted strong gains today due in part to the big sell off in the grain futures markets to start the trading week.

The noon beef report today showed Choice cutout value down 61 cents at $271.71, while Select grade fell 57 cents to $255.86. The Choice-Select spread is currently at $15.25. Movement at midday today was 60 loads.

Technical analysis: Live cattle futures bulls have the overall near-term technical advantage. However, a three-month-old uptrend on the daily bar chart has been negated. Live cattle bulls' next upside price objective is to close April futures prices above solid resistance at the contract high of $162.75. The next downside technical objective for the bears is closing prices below solid technical support at $156.85. First resistance is seen at today’s high of $160.975 and then at $162.00. First support is seen at today’s low of $159.50 and then at the January low of $158.55.

Feeder cattle futures bears have the overall near-term technical advantage. Prices are in a fledgling downtrend on the daily bar chart. The next upside price objective for the feeder bulls is to close March futures prices above technical resistance at the January high of $188.75. The next downside price objective for the bears is to close prices below solid technical support at the October low of $175.25. First resistance is seen at today’s high of $183.65 and then at $185.00. First support is seen at today’s low of $181.40 and then at $180.00.

What to do: Cover all corn-for-feed and soymeal needs in the cash market through February. Be prepared to extend coverage on additional price pressure.

Hedgers: Carry all risk in the cash market for now.

Feed needs: Cover all corn-for-feed and soymeal needs in the cash market through February.

 

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