Livestock Analysis | February 27, 2024
Price action: April lean hogs fell 37 1/2 cents to $85.90 and nearer the session low.
Fundamental analysis: The lean hog futures market paused today amid the existing price uptrend that remains firmly in place.
Futures traders are reluctant to build premiums to the cash index. The CME lean hog index is up another 36 cents to $79.46 as of Feb. 23. Wednesday’s projected cash index reading is up another 32 cents at $79.78, continuing the seasonal climb. April futures finished today at a $6.24 premium to today’s cash quote. The five-year average increase in the cash index from now until mid-April is nearly $7.50. The five-day rolling average cash hog price quote for today is $72.29. The noon report today showed pork cutout value rose $1.85 to $92.84, on a $7.48 rise in bellies. Movement at midday was decent at 170.69 loads.
Monday afternoon’s USDA’s cold storage report showed pork stocks rose 40.6 million lbs. during January to 468.0 million lbs. The five-year average was a 48.6 million-lb. increase for the month. Pork stocks declined 51.1 million lbs. (9.8%) from January 2023 and were 51.87 million lbs. (10.0%) lower than the five-year average.
Technical analysis: The lean hog futures bulls have the firm overall near-term technical advantage. A two-month-old uptrend is in place on the daily bar chart. The next upside price objective for the hog bulls is to close April prices above solid chart resistance at the contract high of $91.60. The next downside price objective for the bears is closing prices below solid technical support at $82.50. First resistance is seen at this week’s high of $87.05 and then at the February high of $88.90. First support is seen at this week’s low of $85.525 and then at $84.00.
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 futures dropped 37.5 cents to $187.725, while expiring February futures fell 12.5 cents to $185.60. March feeder cattle futures slipped 5 cents to $253.00.
Fundamental analysis: Live cattle futures continue to struggle breaking above recent highs as premiums to the cash market remain wide. Concerns remain over livestock stress this week as temperatures swing wildly across the Plains, as temperatures are expected to fall 40 degrees overnight, warm up into the weekend, then drop again back into the teens early next week in the northern Plains, says World Weather Inc. The swing in temperatures could cause livestock stress and further pressure cattle weights, which have seemingly just stabilized from the drop caused by the artic weather in January. That could be the catalyst the cattle market needs to break above recent highs, in both cash and futures, further tightening already tight supplies. Cash cattle trade has yet to take place this week as packers’ margins continue to be deep in the red. Fresh contracted supplies become available later this week, which further reduces the urgency of returning to cash negotiations for packers. Wholesale beef prices continue to show impressive strength, with Choice remaining above the key $300.00 mark. Choice cutout rose 45 cents to $302.24 while Select jumped $2.73 to $290.72.
Feeder cattle showed relative strength today though continue to stall near recent highs as well. Concurrent gains in the corn market has done little to deter feeder bulls. Meanwhile, the feeder cattle index continues to stall near the mid-February highs, concerning for bulls as deferred contracts continue to trade at hefty premiums to both nearby contracts and the index.
Technical analysis: April live cattle futures saw modest losses as prices continue to trade near recent highs. Bulls continue to hold full control of the technical advantage as prices consolidate for the next leg higher. Resistance stands at $188.10, backed by the for-the-move high at $189.20, then the psychological $190.00 mark. Meanwhile, support stands at the 10-day moving average at $186.90, $186.55, with significant backing from the uptrend line stemming from the December lows around $184.50.
March feeder cattle futures showed relative strength to fats today though continue to consolidate near recent highs as well. Bulls continue to own the technical advantage. Resistance stands at $253.45, with backing from $254.575, the for-the-move high at $254.9, then $255.0. An uptrend line is quickly catching up to prices and serves support at $251.25. That is backed by the 10-day moving average at $250.95, then $248.825.
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.
