Livestock Analysis | October 30, 2023
Price action: Lean hog futures rallied 70 cents before closing at $71.175, near the mid-point of today’s session.
Fundamental analysis: Lean hog futures continued last week’s surge to start the week, further eroding the discount December futures hold to the CME lean hog index. The index fell 24 cents to $77.95 today (as of Oct. 26), the lowest level since mid-May. The preliminary calculation puts the index down an additional 44 cents to $77.51 tomorrow (as of Oct. 27). Thes narrow spread amid the seasonal downturn in cash hog prices leaves futures vulnerable for extensive weakness, despite the recent more bullish technical posture. The index shows no early signs of bottoming, which would be uncommon for this point in the year as demand for most cuts fall and hog weights increase seasonally.
Wholesale pork prices were strong at midsession, surging to the highest level in nearly two weeks. All cuts apart from ribs rose, driving overall cutout $2.34 higher to $88.85. Movement fell to the lowest mark since Oct. 9, indicating grocers are willing to pay a premium now that supplies are tighter.
Technical analysis: The surge seen in lean hog futures over the past week has shifted the technical advantage more into the bulls’ favor, though it is still early for a market bottom seasonally. December futures ended the session near the midpoint of today’s range. Bulls will seek to hold prices above the 40-day moving average, currently at $70.92, else a trip to the psychological $70.00 mark is likely. Additional backing lies at $69.50, then last week’s “scene of the crime” breakout point at $68.15. Bears are looking to hold resistance at $71.85, backed by $72.15, then $72.77.
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.
Price action: December live cattle gained $1.025 at $183.25 and near mid-range. November feeder cattle closed up 77 1/2 cents at $237.675 and nearer the session low.
Fundamental analysis: The cattle futures markets to start the trading week continued their impressive recoveries from the October lows. Strengthening cash and wholesale fundamentals supported gains in futures.
Cash cattle bids strengthened late week last week as packers raised cash bids late Friday in an apparent attempt to buy more cattle. Still, last week’s cash cattle trading averaged $184.02, down $2.13 from the week prior. Our cash sources are looking for steady-firmer cash cattle trading later this week, despite contract cattle coming to market late this week.
The noon report showed wholesale beef cutout values up, with Choice rising $1.97 to $309.54, while Select grade gained 11 cents to $280.23. The Choice-Select spread widened to $29.31. Movement at midday was light at 33 loads.
The outside markets were mostly supportive for the cattle futures markets today, as the U.S. stock indexes rallied and the U.S. dollar index was weaker.
Technical analysis: The live and feeder cattle futures bears still have the overall near-term technical advantage. Prices are in five-week-old downtrends on the daily bar charts. The next upside price objective for the live cattle bulls is to close December futures above solid resistance at $184.425, which is the top of a downside price gap on the daily bar chart. The next downside technical objective for the bears is closing prices below solid technical support at the October low of $177.30. First resistance is seen at $184.425 and then at $185.00. First support is seen at $182.00 and then at $181.00. Meantime, a bearish pennant pattern has formed on the daily bar chart for November feeders. The next upside price objective for the feeder bulls is to close November futures prices above technical resistance at $245.00. The next downside price objective for the bears is to close prices below solid technical support at $230.00. First resistance is seen at today’s high of $239.00 and then at $240.00. First support is seen at today’s low of $236.825 and then at $235.00.
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 all corn-for-feed and soymeal needs covered in the cash market through November.
