Livestock Analysis | February 15, 2024
Price action: Hog futures could sustain only a portion of early-Thursday gains. Nearby April futures ended the day 47.5 cents higher at $85.00.
Fundamental analysis: The hog and pork situation still looks quite supportive of the late-winter/spring outlook. The hog index for Tuesday was officially confirmed at $74.60, up 49 cents, this morning. Meanwhile, today’s preliminary quote for Wednesday’s cash quote at $75.12, up 52 cents, illustrated why it’s usually not a very good idea to fight the futures market as the hog contracts go off the board. That is, it looks like there will be only a 5.5-cent difference between yesterday’s February futures close at $75.175 and the cash index price (where the contract will be officially settled tomorrow).
Thus, the cash market is trending higher at this point. That’s to be expected as the industry continues catching up from early-winter marketing delays. Indeed, these conditions may exaggerate the usual seasonal decline in hog supplies and presage substantial seasonal reductions in hog slaughter over the next few weeks. Diminished grocer demand for the various pork cuts is thought to undercut the hog/pork complex in late winter (offsetting seasonal supply reductions), but we still expect active Easter ham features by grocers this spring, as opposed to how they maintained greatly elevated ham prices last year. We believe April futures trading almost $10.00 over the index at this point indicates we have considerable company on that score. Today’s big morning rebound in pork cutout values, up $3.08 to $88.99, which put it back in the upper portion of its recent range, also looks supportive.
Technical analysis: Bulls still hold the short-term technical advantage in April hog futures in the wake of Wednesday’s big rally. Bears proved unable to force a significant drop below yesterday’s high at $84.725, confirming solid initial support between that point and today’s low of $84.65. Expect secondary support to emerge around the Jan. 26 high of $84.00 if bears should prove able to force the market below initial support. A drop below that point would have bears looking to test the 10-day moving average near $82.17. Conversely, bulls proved unable to force a breakout above resistance at the important Jan. 30 high of $85.925. That’s likely reinforced by the September high at $86.05. Still, a short-term breakout would have bulls targeting last summer’s highs around $89.00.
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 soybean meal needs covered in the cash market through February.
Price action: April live cattle rose $1.60 to $185.60 and near the session high. March feeder cattle gained 87 1/2 cents to $247.10, also near the session high.
Fundamental analysis: Live and feeder cattle futures markets were boosted today by still-bullish near-term technicals that invited more speculator buying interest.
Recent wholesale price weakness is weighing on the cash cattle market, although beef prices had risen moderately at midsession. USDA’s report on Thursday’s cash cattle trade confirmed late-afternoon talk of active trading at $180.00. The five-area average came in at $180.13 in active trading. Packers are likely to lower cash bids or possibly keep them steady, but producers who didn’t sell Thursday’s will probably be even less amenable to lower bids.
On the positive side, weekly cattle slaughter totals are likely to reach some of the lowest levels of the year during the next month. Also, it appears the market is not going to see a compensatory rise in steer weights in the wake of the big January freeze and snow. The latest weekly slaughter report put steer dressed weights at 909 pounds per head. That’s a three-pound weekly drop and left the latest figure just one pound over both the year-ago and five-year averages at 908 pounds.
The noon report today showed Choice-grade boxed beef cutout value rose $1.19 to $295.19, while Select jumped $3.84 to $287.86, narrowing the Choice/Select spread to $7.33. Movement at midday was 66 loads.
The annual Ag Outlook Forum saw USDA project 2024 U.S. beef production at 26.19 billion lbs., down 3% from 2023. Exports are projected to total 2.785 billion lbs., down 8.3% from last year. USDA also this morning reported U.S. beef export sales of 16,600 MT for the week ended Feb. 8, down 19% from the previous week and 18% from the four-week average.
Technical analysis: The live and feeder cattle futures bulls have the overall near-term technical advantage. Nine-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 $190.00. The next downside technical objective for the bears is closing prices below solid technical support at $180.00. First resistance is seen at $186.00 and then at this week’s high of $187.575. First support is seen at this week’s low of $182.825 and then at $182.00. The next upside price objective for the feeder bulls is to close March futures prices above technical resistance at $255.00. The next downside price objective for the bears is to close prices below solid technical support at $240.00. First resistance is seen at Wednesday’s high of $248.40 and then at this week’s high of $249.90. First support is seen at this week’s low of $243.55 and then at $242.125.
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 soybean meal needs covered in the cash market through February.
