Livestock Analysis | February 22, 2024
Price action: Hog futures once again broke out to the upside Thursday, with nearby April jumping $1.225 to $87.20.
Fundamental analysis: The cash hog and wholesale pork markets remain quite strong, with today’s early gains triggering a breakout to fresh eight-month in nearby April futures. The surge in the cash hog index did slow modestly today but is still advancing quickly. Today’s official quote (for Tuesday) matched the preliminary figure at $77.97, up $1.17, calculated yesterday. The USDA data published this morning (for Wednesday) indicated another jump of 81 cents to $78.78. Moreover, after having dipped the past two sessions, pork cutout advanced once again, leaping $2.90 to $93.07. This was only slightly below Monday’s 2024 high at $93.78.
Again, the complex is exhibiting this strength despite a substantial year-to-year increase in production since Jan. 1 (with the early-2023 supplies also proving surprisingly large). The obvious implication of the price strength is vigorous demand. For example, December U.S. pork exports were the largest since May 2021. We expect tomorrow’s weekly export sales figure to prove quite large as well. We also believe domestic consumers are responding well to grocers holding the line on retail pork prices. The short-term outlook probably depends on the aggressiveness with which they will feature hams over the Easter Holiday. We think they’ll push attractive features and that consumers will react strongly to the apparent bargains. This is a big reason we think the cash market will justify the big premium still built into the April contract.
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 fell $1.15 at $186.55, nearer the session low and hit a 3.5-month high early on. May feeder cattle rose 20 cents at $259.325, nearer the session low after reaching a four-month high early in the day.
Fundamental analysis: The cattle futures markets today saw some routine profit-taking from the speculators after recent solid gains. Underlying cash market fundamentals remain bullish. Estimated cattle slaughter totaled 472,000 head through the first four days of this week. That’s 14,000 head below last week and about 1,500 head below one year ago. Our cash sources expect the weekly total to fall under 600,000 head, with some as low as 590,000 as packers try to control tight supplies amid negative margins.
As of this writing there was no word of significant cash cattle trading action. Iowa saw 96 head of steers change hands at $182.00 Wednesday. It’s likely that cash trade will occur more actively following Friday afternoon’s monthly USDA cattle-on-feed report. Most expect the report to be friendly for futures prices and show continued tighter supplies of cattle.
The noon report today showed Choice boxed beef cutout value rose $1.39 to $299.19, while Select gained $1.23 to $285.69, taking the Choice/Select spread to $13.50. Movement at midday was 69 loads.
Technical analysis: April live cattle futures prices scored a mildly bearish “outside day” down, but the bulls still have the firm overall near-term technical advantage. A 2.5-month-old price uptrend is in place on the daily bar chart. The next upside price objective for the 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 today’s high of $189.20 and then at $190.00. First support is seen at $185.00 and then at $184.00.
The feeder cattle futures bulls still have the firm overall near-term technical advantage. A 2.5-month-old uptrend is in place on the daily bar chart. The next upside price objective for the feeder bulls is to close May futures prices above technical resistance at $265.00. The next downside price objective for the bears is to close prices below solid technical support at $250.00. First resistance is seen at today’s high of $261.225 and then at $263.00. First support is seen at this week’s low of $255.30 and then at $254.00.
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 soybean meal needs covered in the cash market through February.
