Livestock Analysis | January 30, 2023
Hogs
Price action: February lean hog futures fell 72 1/2 cents to $75.15. April hogs rose 7 1/2 cents to $86.525 and finished near mid-range.
Fundamental analysis: Lean hog futures market bulls are working to forge a price bottom following the recent extended seasonal selloff. The CME lean hog index is starting to help bulls’ cause. The cash index was up 12 cents to $72.64 (as of Jan. 26) and Tuesday’s quote is projected up 7 cents at $72.71. That would mark the fourth day in a row of price gains in the cash hog index and is suggestive of a seasonal low being in place. The five-day rolling average cash hog price this morning was quoted at $71.05. The noon pork report showed cutout value firmed $2.21 at $81.46, led by gains in picnics and hams. Movement was decent at 186.31 loads.
Also friendly for the hog market, it appears the pork industry is working its way through the backlog created by extended packing-plant cutbacks during the holiday season. Much depends upon whether hog supplies drop to levels suggested by USDA’s December Hogs & Pigs Report. Even if hog slaughter levels match year-ago, they would still be well below the highs seen in 2019-20. Elevated fed cattle and beef prices also suggest better substitution demand for pork in the coming months.
Technical analysis: Lean hog futures bears still have the firm overall near-term technical advantage. April futures are in a four-week-old downtrend on the daily bar chart. The next upside price objective for 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 last week’s high of $88.325 and then at $89.00. First support is seen at $85.00 and then at the January low of $83.70.
What to do: Get current with advised feed coverage. Be prepared to extend coverage on additional price pressure.
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 February.
Cattle
Price action: February live cattle rose $2.025 to $158.75, while April live cattle hit a contract high and gained $2.525 at $163.35. March feeder cattle futures rose 45 cents to $183.915, nearer the session high and hit a two-week high.
Fundamental analysis: A winter storm and cold temperatures in the Plains states along with expectations for steady/higher cash cattle trade this week boosted the cattle futures markets today. February live cattle futures are presently at a $3.50 premium to the cash market, which signals traders are finally starting to build in some bullish hopes. The noon beef report showed Choice grade cutout up 7 cents at $267.83 and Select grade up $1.14 at $251.68. The Choice/Select spread narrowed to $16.15. Movement at midday was light at 36 loads.
While beef prices are generally seasonally weaker during the month of February, retail beef prices have recently remained below comparable year-ago levels, which should prompt better consumer demand. Cattle supplies in the feedlot are also lower, including lower weights, and cattle slaughter typically declines in late February and March.
USDA’s Cattle Inventory Report out Tuesday afternoon is expected to show another reduction in the U.S. cattle herd — down around 3% from last year at this time.
Technical analysis: Live cattle futures bulls have the solid overall near-term technical advantage and gained more power today. Their next upside price objective is to close April futures prices above solid resistance at $170.00. The next downside technical objective for bears is closing prices below solid technical support at the January low of $158.55. First resistance is seen at today’s contract high of $163.475 and then at $164.00. First support is seen at $162.00 and then at today’s low of $160.95.
Feeder cattle futures bulls and bears are back on a level overall near-term technical playing field. The next upside price objective for feeder bulls is to close March futures prices above technical resistance at the January high of $188.75. The next downside price objective for bears is to close prices below solid technical support at the January low of $179.175. First resistance is seen at today’s high of $184.75 and then at $186.00. First support is seen at today’s low of $183.15 and then at $182.50.
What to do: Get current with advised feed coverage. Be prepared to extend coverage on additional price pressure.
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 February.
