Hogs
Price action: February lean hogs rose 85 cents to $81.85, nearer the session high and closed at a three-week high close.
Fundamental analysis: Lean hog futures today saw more short covering following losses on Monday and Tuesday. Traders are now thinking the cash hog market has put in a seasonal bottom. And while the overall chart posture for the hog futures market is not overtly bullish, recent gains suggest a market bottom is in place and that prices can at least work sideways in the near term. More gains in the cattle futures markets today also supported buying in the hog futures.
The latest CME lean hog index is up 6 cents to $81.67. Thursday’s projected cash index price is up 16 cents at $81.83. Today’s national direct 5-day rolling average cash hog price quote is $69.89. The noon report today showed pork cutout value down 54 cents to $93.48, led by losses in most cuts. Movement at midday was 159.00 loads.
Technical analysis: February lean hog futures bears still have the slight overall near-term technical advantage. However, a price downtrend on the daily bar chart has been negated and prices are starting to trend up. The next upside price objective for the hog bulls is to close February futures prices above solid chart resistance at the November high of $83.60. The next downside price objective for the bears is closing prices below solid technical support at the November low of $77.125. First resistance is seen at last week’s high of $82.275 and then at $83.60. First support is seen at this week’s low of $79.60 and then at $78.60.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
Feed needs: You should have all your soymeal needs covered through December in the cash market. For corn, you now have all needs through November covered in the cash market.
Cattle
Price action: February live cattle rose $2.10 to $224.00, near the daily high and hit a three-week high. January feeder cattle gained $4.725 to $336.575, near the session high and hit a four-week high.
Fundamental analysis: The live and feeder cattle futures markets rallied again today on more short covering and higher cash cattle trading so far this week in a light test. The much-improved near-term technical postures for live and feeder cattle futures markets are also inviting the chart-based speculators to more actively play the long sides.
USDA at midday today reported light cash cattle taking place so far this week at solidly higher prices, with steers and heifers averaging $216.64. USDA reported last week’s average cash cattle trading price was $211.53. The noon report today showed wholesale boxed beef cutout values lower, with Choice-grade down 78 cents at $363.03, while Select-grade fell $3.22 to $349.90. Movement at midday was 86 loads. The Choice-Select spread is presently $13.13.
Technical analysis: The live and feeder cattle futures bulls have made good technical progress this week, to firmly suggest near-term market bottoms are in place and that prices can begin to trend sideways to higher. The next upside price objective for the live cattle bulls is to close February futures above resistance at $232.50. The next downside technical objective for the bears is closing prices below solid technical support at the November low of $204.325. First resistance is seen at $225.00 and then at $226.00. First support is seen at Wednesday’s low of $219.625 and then at Tuesday’s low of $217.05.
The next upside price objective for the feeder bulls is to close January futures prices above technical resistance at $348.175. The next downside price objective for the bears is to close prices below solid technical support at the November low of $299.525. First resistance is seen at today’s high of $337.775 and then at $340.00. First support is seen at today’s low of $331.30 and then at Wednesday’s low of $327.725.
What to do: Cover your corn-for-feed needs in the cash market through November.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: For soymeal, you have full coverage in cash through December. For corn, you have all needs through November covered in the cash market. Be prepared to make additional purchases if value prices continue.