Livestock Analysis | January 9, 2024
Price action: February lean hogs rose $1.275 to $71.875 and nearer the session high. Prices hit a six-week high today.
Fundamental analysis: The lean hog futures market was boosted today as wintry weather in the central U.S. much of this week is likely to restrict hog transportation to packing plants. Heavy snow hit the Midwest Monday and today, and another storm is forecast for late Thursday into Friday. Early next week will see extreme cold in the region. The initial market reaction to the winter weather appears bullish but hog supplies will likely be backed up in the following couple weeks.
Short covering and bargain hunting by the speculators was featured in the lean hog futures market today.
Lean hog futures bulls were also encouraged as February futures are holding a premium to the cash index. The latest CME lean hog index is down 11 cents to $65.74 as of Jan. 5. The preliminary calculation for Wednesday puts the cash index up 9 cents to $65.83, giving further confidence a seasonal low could be in place. The national direct five-day rolling average cash hog price today was quoted at $44.73. The noon report showed pork cutout value rose 62 cents to $85.64, led by gains in bellies and hams. Movement at midday was a firm 186.07 loads.
Technical analysis: February lean hog futures today saw a bullish upside “breakout” from the recent choppy trading range at lower price levels. The bears still have the overall near-term technical advantage. The next upside price objective for the hog bulls is to close February prices above solid chart resistance at the November high of $77.775. The next downside price objective for the bears is closing prices below solid technical support at the contract low of $64.575. First resistance is seen at today’s high of $73.05 and then at $74.00. First support is seen at today’s low of $70.275 and then at this week’s low of $68.95.
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 January.
Price action: February live cattle futures led the complex higher Tuesday, rallying 82.5 cents to $170.775. March feeder cattle futures dropped 20 cents to $224.875, while nearby January feeder futures fell 10 cents to $223.775.
Fundamental analysis: Live cattle futures made up most of Monday’s losses but continue to struggle against overhead resistance. As expected, cash cattle trade is off to a slow start this week, with just a small lot of mixed steer/heifers trading hands at $172.00 on Monday. Plants are running reduced slaughter runs across the central U.S. as the snowstorm shuts down packing plants, which could limit demand for cash cattle this week, though reports of plants opening for Saturday to make up for reduced weekly counts are circulating. Concerns over the bitter cold which rolls into the U.S. Plains over the weekend and linger until next week were also supportive for livestock futures, as livestock stress is expected to be high, especially considering the relatively mild temperatures that has persisted most of the winter. Wholesale beef prices firmed at midsession, with Choice cutout gaining $1.96 to $280.79, which could mark the third consecutive day of gains if maintained in the afternoon. Select cutout gained $3.30 to $262.66.
Outside markets were supportive for live cattle futures, as commodities, particularly agricultural commodities, saw gains today, encouraging buying interests. Meanwhile, gains in corn limited buying interest in feeders, which continue to trade in a tight sideways range.
Technical analysis: February live cattle futures continue to butt up against downward trendline resistance stemming from the late September high. Bulls have put in a series of higher lows and higher highs over the past month, giving bulls the near-term technical advantage. Resistance stands at $171.55 with backing from the 40-day moving average at $172.25. Bulls are seeking to hold support at $170.25 then $169.25 on selling pressure, with firm backing from $169.00.
March feeder cattle have traded relatively sideways for the past three weeks, despite leading the cattle complex higher in early December. Resistance stands at $226.60, then last week’s high close of $227.25. Meanwhile, bulls are seeking to hold support at the 40-day moving average, which capped losses today, currently at $224.15. Further support stands at $222.725.
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 January.
