Livestock Analysis | November 28, 2023

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: Hog futures rebounded strongly from last week’s breakdown, with nearby December rising $1.05 to $68.925 and most-active February leading the way higher with a $2.10 jump to $69.025.

Fundamental analysis: After having dipped to the mid-$80.00’s area last week, pork cutout leapt $4.58 at Monday’s close, to $88.75. That strength may have triggered today’s futures advance, especially with the nearby contracts having fallen to substantial discounts below the hog index last week. Broad-based commodity buying probably helped lift the livestock markets as well. The hog index for last Friday was officially quoted at $72.33 this morning, with Monday’s preliminary quote falling another 67 cents to $71.66. Thus, even with today’s rally in hand, December futures still ended the day almost $3.00 below cash with just over two weeks until expiration.

It's also apparent the industry doesn’t expect a quick post-holiday rebound, with February futures trading at only a slight premium to December. Anticipation of persistently increased supplies versus year-ago levels is likely weighing on the market, despite the historical tendency for hog supplies and slaughter rates to decline from their normal mid-December peak early in the new year. Traders may be anticipating slaughter disruptions for three weeks (due to Christmas and New Year’s Day on Mondays) as was the case last year. Much depends upon packer operational aggressiveness on Saturday, Dec. 23. A low kill figure for that day and the preceding week might bode ill for the hog prices in the post-holiday period.  

Technical analysis: Bears still own the short-term technical advantage in February lean hog futures, although today’s action weakened their hold. One can argue that today’s advance made the Oct. 25 low of $69.175 initial support, with backing from last Friday’s low of $68.20, Monday’s low of $66.825 and today’s bottom at $65.80. Initial resistance at today’s high of $69.375 is reinforced by Monday’s high at $69.65 and by psychological resistance at $70.00. A breakout above the latter point would have bulls targeting last week’s chart gap between $71.40 and $71.575.

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: February live cattle futures jumped $4.00 to $172.825, while nearby December futures rallied $2.875 to $171.65. January feeder cattle futures led the complex higher, rising the daily limit of $8.25 to $221.05.

Fundamental analysis: Cattle futures surged Tuesday, making up some of the sharp losses seen in the past couple of sessions, despite weakening cash fundamentals. Live cattle futures bounced from the most oversold level since March 2022, affirming the belief that price action the last two days was capitulation by futures’ bulls and pointing to a potential near term bottom. Bulls want to see further buying in futures and a bounce in cash fundamentals to affirm this belief.

Cash cattle trade got an earlier start than has been the norm recently, with trade taking place at and just under the $175.00 mark, down from last week’s average of $176.77. Wholesale beef prices also slipped to start the week, as Choice cutout fell 35 cents to $296.60 and Select dropped 8 cents to $267.72.

The feeder cattle index jumping from $225.24 to $230.38 likely fueled gains in the feeder market today as cash prices likely rallied more than expected. January futures were already trading at a discount to the index, leaving room for explosive gains if the recent rally continues.

Technical analysis: February live cattle futures made up all of Monday’s losses and then some in corrective buying today. Bears still retain control of the technical advantage, though additional buying would point to a potential reversal as the market bounced from extreme oversold conditions. Bulls are looking to overcome initial resistance at $174.30 before firmer resistance at $175.00 then the 20-day moving average at $177.10. Support stands at $169.75, then Monday’s for-the-move low of $168.625.

January feeder cattle futures saw explosive gains as well, with prices recovering all of Monday’s loss. Significant resistance remains in place though, with the 10-day moving average standing firm at $224.20. Further buying past the psychological $225.00 mark would give bulls confidence the recent bounce is more than corrective buying. Meanwhile, support stands at the psychological $220.00 mark, then Monday’s low of $212.125.

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.