Livestock Analysis | October 23, 2023

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: Hog futures ended Monday on a mixed note. The nearby December contract gained 17.5 cents to $66.175, while the deferred contracts posted mixed closes.

Fundamental analysis: The hog and pork industry continues anticipating a relatively normal seasonal decline from now into mid-December. That’s clearly not very conducive to bullish ideas about the short-term outlook, since the bearish expectations are firmly rooted in the market’s history of seasonally large hog supplies and diminished consumer demand for pork cuts other than hams. Conversely, with a ‘normal’ decline built into steeply discounted December futures, it will seemingly take “abnormally” bearish conditions to cause a cash market drop below that already built into the market. Moreover, a comparatively strong market performance (i.e., a smaller-than-usual cash price drop) might be coming, since late-2023 pork production is largely expected to match last year, whereas retail pork prices are relatively low compared to those seen in late 2022 and through the first several months of this year. Moreover, with ham and turkey stockpiles at multi-year lows, grocers and consumers may be willing to pay more for those products during the holiday season.

Technical analysis: Bears still hold the short-term technical advantage in December hog futures, especially after the contract reached a fresh low of $65.40 last Friday. Initial support at that level is likely backed by psychological support at $65.00, with a close below that point having bears targeting the $60.00 level. Today’s high established initial resistance at $67.10, with strong backing near the former low at $67.30. That’s backed by the 10-day moving average near $68.52. A close above that point would open the door to a retest of the psychological $70.00 level.

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 soymeal needs covered in the cash market through November.

 

 

Cattle

Price action: Cattle futures plunged on active long-liquidation Monday, with the expiring October live cattle contract diving $6.025 to $178.25 and most-active December futures crashing $6.275 to $178.35. Expiring October feeder futures sank $4.20 to $237.625, with the November contract plummeting $6.425 to $235.80.

Fundamental analysis: Last week’s late futures weakness set the stage for today’s follow-through breakdown, with that afternoon’s monthly USDA Cattle on Feed report providing the trigger for strong selling today. The plunge at least partially reflects pragmatic selling based on bullish traders’ inability to halt last week’s decline, long-liquidation spurred by bullish traders bailing out of the market and active technical selling in the wake of sharp Monday morning losses.

The Cattle on Feed report indicated surprisingly large feedlot placements during September, whereas producers apparently marketed their animals much less aggressively than anticipated. The net result was an October 1 U.S. feedlot population well above year-ago levels, whereas a modest decline was expected. The low marketings figure implied more market-ready animals were still in feedlots, while the placements result means more will be coming down the road. Feeder futures clearly reflected pessimism about feedlot managers’ ability and willingness to pay up for replacement yearlings during the coming weeks and months.

And yet, today’s futures breakdown was almost surely an overreaction, since last week’s five-area average for direct feeder steer trading, at $186.15, was in the top 10 highest weekly averages on record. The Nebraska average at $186.69 was the fifth highest for that state. Choice beef cutout climbed back above $305.00 last week and slipped just 42 cents to $304.96 at noon today. Select cutout was hanging around $280.00 last week, then jumped $3.84 to $282.54 late this morning. This suggests the futures breakdown was overdone on a short-term basis and that a followthough to the downside could be limited. 

Technical analysis: For the first time in months, bears hold the short-term technical advantage in most-active (December) live cattle futures. This was sharply emphasized by the contract’s gap below its 100-day moving average, which hasn’t been the case since early May. Look for initial resistance at the psychological $180.00 level, with strong backing at today’s high of $183.65 and the 100-day moving average near $184.50. Today’s low puts initial support at $178.175, with stout backing from the 200-day (40-week) moving average near $176.56. Bears are likely targeting the psychological $175.00 level.

Bears also hold the strong short-term technical advantage in November feeder futures, especially after it closed below its 200-day moving average near $237.78. Look for initial support at the daily low of $235.15, which likely reflected psychological support near $235.00. Bears are likely targeting $230.00, then $225.00. Expect psychological resistance to emerge around $240.00, with backing from the daily high at $241.60. A close above the latter point would have bulls targeting the latest quote for the feeder index at $243.99, then the $245.00 level.               

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 soymeal needs covered in the cash market through November.  

 

Latest News

H&P Report negative compared to pre-report expectations
H&P Report negative compared to pre-report expectations

Nearly every category topped the average pre-report estimates.

After the Bell | March 28, 2024
After the Bell | March 28, 2024

After the Bell | March 28, 2024

Pro Farmer's Daily Advice Monitor
Pro Farmer's Daily Advice Monitor

Pro Farmer editors provide daily updates on advice, including if now is a good time to catch up on cash sales.

PF Report Reaction: Bullish USDA data for corn
PF Report Reaction: Bullish USDA data for corn

Corn planting intentions and March 1 stocks came in lower than expected.

Report Snapshot: USDA shows lighter-than-expected corn acres and stocks
Report Snapshot: USDA shows lighter-than-expected corn acres and stocks

USDA reported corn acres of 90.036 million acres for 2024 and March 1 stocks of 8.347 billion bu., both well below trade estimates. Soybean acres were slightly lower than expectations, while stocks were higher.