Livestock Analysis | January 22, 2024
Price action: February lean hogs rallied 17.5 cents to $70.925 following choppy trade.
Fundamental analysis: Lean hog futures saw limited volatility and traded most of the session near unchanged. The downside was kept largely intact by the seasonal rising of the CME lean hog index, which rose 19 cents to $68.06 today (as of Jan. 18). The preliminary calculation puts the index up another 34 cents to $68.40 tomorrow, which continues to narrow the premium held by nearby futures. That premium, which shrank to $2.525 today, is likely to continue to underpin futures, eventually giving way to a possible upside breakout. Wholesale pork prices continue to lend strength to futures as well. Cutout surged $2.27 to $90.83 at midsession, which would mark the highest quote since Nov. 6 if sustained this afternoon. All cuts but butts and loins saw gains this morning. The persistent strength seen in wholesale pork is encouraging, especially considering supplies are increasing following plants being shut down due to wintry weather the past couple of weeks.
Technical analysis: February lean hog futures pivoted near unchanged most of the session. Prices were supported by the 20-day moving average at $70.50, which ultimately bounced prices into a higher close. Further selling targets the psychological $70.00 mark. Meanwhile, resistance stands at $71.00, $71.50, then last week’s high at $71.95.
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: April live cattle closed down 47 1/2 cents at $176.90 and nearer the session high. March feeder cattle fell 67 1/2 cents to $231.275 and nearer the session high.
Fundamental analysis: The cattle markets to start the trading week saw routine corrective price pullbacks in existing uptrends on the daily bar charts. Losses were limited by better risk appetite in the general marketplace today, which saw the U.S. stock indexes hit 12-month highs. Last Friday’s USDA Cattle-on-Feed Report was deemed neutral by traders, showing 11.93 million head of cattle in large feedlots (1,000-plus head) as of Jan. 1, up 248,000 head (2.1%) from year-ago. December placements fell 4.5%, while marketings dipped 0.9% from year-ago levels.
Warmer weather in the Midwest this week should allow better performance for cattle in feedlots, although some freezing rain in the forecast could disrupt transportation of animals to market.
Last week’s cash cattle trading averaged $173.76, up 29 cents. We look for higher cash cattle prices again this week, though it will likely get pushed into late week. Wholesale beef price strength has resumed, with the noon report showing Choice grade cutout value up $2.31 at $297.81, while Select grade gained $2.00 at $285.05. Movement at midday was light at 41 loads. The Choice-Select spread is presently $12.76.
Technical analysis: The live and feeder cattle futures bulls have the overall near-term technical advantage. Six-week-old price uptrends are in place on the daily bar charts. The next upside price objective for the live cattle bulls is to close April futures above solid resistance at $180.00. The next downside technical objective for the bears is closing prices below solid technical support at $172.50. First resistance is seen at the January high of $177.97 and then at $179.00. First support is seen at today’s low of $175.925 and then at $175.00. The next upside price objective for the feeder bulls is to close March futures prices above technical resistance at $238.00. The next downside price objective for the bears is to close prices below solid technical support at $225.00. First resistance is seen at the January high of $233.45 and then at $235.00. First support is seen at today’s low of $228.75 and then at last week’s low of $226.875.
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.
