Livestock Analysis | October 5, 2023

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: Hog futures rebounded strongly Thursday, with the expiring October contract rising 97.5 cents to $80.90 and most-active December leaping $3.10 to $72.275.

Fundamental analysis: The comparative cash hog and pork firmness exhibited lately seemingly sparked today’s strong rebound in hog futures. The cash market, in the form of the CME hog index, was officially stated at $84.28 as of Tuesday; that was down 27 cents from Monday. Wednesday’s preliminary figure fell another 59 cents to $83.69. After ending yesterday having edged up three cents to $94.64, pork cutout rose 90 cents to $95.54 at midsession today.

Still, these fundamental developments weren’t terribly earth-shaking, especially when viewed in the context of the hog/pork complex’s history of fourth-quarter weakness. This suggests a good bit of short-covering and technically-motivated buying came into the market. Whether the advance can be sustained is very much open to question. 

Technical analysis: Bears still seem to hold the short-term technical advantage in December hog futures, although today’s upward surge certainly weakened their hold on the market. The move flipped the contract’s 10-day moving average from resistance to initial support near $71.73. The bottom of Monday’s chart gap between $71.775 and $71.375 marks additional support. A drop back below the latter level would have bears targeting today’s low of $69.35. Initial resistance is marked by the contract’s 40- and 20-day moving averages near $73.48 and $73.66, respectively, with a push above that area opening the door to a retest of last week’s high at $76.10.

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 soymeal needs covered in the cash market through mid-October. You are hand-to-mouth on corn-for-feed needs.

 

 

Cattle

Price action: December live cattle fell 65 cents to $185.375, nearer the session low and hit a four-week low. November feeder cattle closed down 12 1/2 cents at $250.30. Prices closed nearer the session low and posted a six-week low close.

Fundamental analysis: Another “risk-off” day in the general marketplace today limited buying interest in cattle futures. Solid rallies in the grain futures markets today were also a negative for feeder cattle futures. Eroding cash and wholesale beef fundamentals are weighing on futures prices as well.

Initial cash cattle trade this week occurred at mostly $1 lower prices and earlier than expected, with activity reported at those levels in both the southern Plains and northern markets. The noon report showed wholesale beef prices continued to decline, with Choice down $1.15 to $295.61, while Select dropped 10 cents to $274.67. The Choice/Select spread is $20.84. Movement at midday was decent at 83 loads. USDA today reported U.S. beef export sales of 13,300 MT for 2023, which were down 25% from the previous week but up 7% from the four-week average.

Bulls are hoping still-tight supplies of market-ready fed cattle will keep the cash market supported into the end of the year. Fed cattle supplies tend to diminish during fall. Consumer demand for beef will likely dip during the holiday season but should remain seasonally firm in the near term.

Technical analysis: The live cattle futures bulls still have the overall near-term technical advantage but are fading. A price uptrend on the daily bar chart has been negated. The next upside price objective for the bulls is to close December futures above solid resistance at the contract high of $192.05. The next downside technical objective for the bears is closing prices below solid technical support at the August low of $181.925. First resistance is seen at Wednesday’s high of $186.775 and then at $188.00. First support is seen at $184.00 and then at $183.00.

The feeder cattle futures bulls have the slight overall near-term technical advantage but have faded badly recently. Prices are trending lower on the daily bar chart. The next upside price objective for the feeder bulls is to close November futures prices above technical resistance at $260.00. The next downside price objective for the bears is to close prices below solid technical support at the August low of $248.925. First resistance is seen at $252.325 and then at $254.00. First support is seen at this week’s low of $249.175 and then at $248.00.

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 soymeal needs covered in the cash market through mid-October. You are hand-to-mouth on corn-for-feed needs.

 

 

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