Livestock Analysis | February 6, 2023
Hogs
Price action: April lean hogs fell $3.75 to $82.725, nearer the session low and hit a 13-month low.
Fundamental analysis: The lean hog futures market bulls ran for cover today on worries about further deteriorating U.S.-China relations after the U.S. shot down a Chinese surveillance balloon over the weekend, and on fully bearish near-term technicals. Futures’ premiums over the cash hog market are also pressuring futures. The February contract is presently at a $2.00 premium to the CME lean hog index, which today was up 20 cents to $73.05 (as of Feb. 2). The index on Tuesday (as of Feb. 3) is projected up 24 cents at $73.29. The April contract’s premium to the cash index is presently just shy of $10. The national direct five-day rolling average cash hog price today was quoted at $71.87.
The noon pork report today showed cutout value rose a solid $8.87 to $87.96, which was led by a $34 gain in bellies. Movement at midday was decent at 145.05 loads.
Look for this week’s hog slaughter to fall below last year at this time, likely suggesting more of the same as hog supplies are expected to decline both seasonally and cyclically.
Technical analysis: Lean hog futures bears have the solid overall near-term technical advantage. Prices are in a five-week-old 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 $88.325. The next downside price objective for the bears is closing prices below solid technical support at $80.00. First resistance is seen at $84.00 and then at $85.00. First support is seen at today’s low of $82.35 and then at $82.00.
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: April live cattle rose 35 cents to $164.475, nearer the session high and hit another contract high. March feeder cattle gained $1.60 to $187.70, nearer the session high and hit a four-week high.
Fundamental analysis: The cattle market bulls are out of the gate in strong fashion to start the trading week, amid bullish cash market fundamentals. The cash cattle market trade was up again last week and we look for cash trade to be higher again this week. Packers are still believed to be short-bought on near-term needs. The noon beef report today showed Choice grade cutout value up $1.62 at $266.36 and Select grade up $1.70 at $253.31. The Choice-Select spread at midday was $13.05. Movement at midday was 67 loads.
Cattle slaughter is seasonally declining is likely to continue to do so for much of February and possibly into March. Also, we look for average weights to decline through late winter and into early spring. While cattle slaughter usually increases when springtime arrives, the rise likely will reflect the addition of calf-fed animals to the slaughter mix, which would do little to increase Choice beef supplies. Fed cattle supplies are running below year-ago levels for only the sixth time in the past 20 years.
Last Friday’s surprisingly strong U.S. jobs report also favors the cattle market bulls, suggesting U.S. consumers may not have to battle an economic recession this year, which would translate into better demand for their favorite meat.
Technical analysis: Live cattle futures bulls have the solid overall near-term technical advantage. Live cattle bulls' next upside price objective is to close April futures prices above solid resistance at $170.00. The next downside technical objective for the bears is closing prices below solid technical support at $161.00. First resistance is seen at today’s contract high of $164.575 and then at $165.00. First support is seen at Friday’s low of $163.55 and then at $162.75.
Feeder cattle futures bulls also have the overall near-term technical advantage. Prices are in a fledgling uptrend 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 $182.50. First resistance is seen at today’s high of $187.85 and then at $188.75. First support is seen at $186.00 and then at today’s low of $185.45.
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.
