Hogs
Price action: February lean hogs rose $1.475 to $79.175, nearer the session high.
Fundamental analysis: Lean hog futures market today saw more short covering. However, gains were somewhat limited by steadily declining cash hog prices. Lean hog futures’ discount to the cash market also worked in the hog futures bulls’ favor today. Hog futures bulls, at least for today, brushed aside limit-down trading in live and feeder cattle futures to start the trading week.
The latest CME lean hog index is down another 90 cents at $84.81. Tuesday’s projected cash index price is down $1.20 to $83.61. Today’s national direct 5-day rolling average cash hog price quote is $74.35. The noon report today showed pork cutout value up 20 cents to $93.63, led by gains in ribs. Movement at midday was 175.43 loads.
Technical analysis: February lean hog futures bears still have the firm overall near-term technical advantage. A price downtrend is in place on the daily bar chart. 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 $75.00. First resistance is seen at $80.00 and then at $81.00. First support is seen at $78.00 and then at last week’s low of $77.125.
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 fell the daily trading limit of $7.25 to $207.525 and hit a nearly five-month low. January feeder cattle also dropped the daily trading limit of $9.25 to $304.975 and hit a nearly five-month low. Daily trading limits in both markets will be expanded on Tuesday.
Fundamental analysis: The live and feeder cattle futures markets suffered another major psychological blow following news late Friday that Tyson Foods Inc. said it is ending operations at a beef plant in Lexington, Nebraska and cutting a shift at an Amarillo, Texas facility as the meat producer hast lost millions of dollars amid the smallest U.S. cattle herd in decades. A big drop in the average cash cattle price fetched last week also pressured futures today.
Bulls got no help from another bullish, but mostly as expected, USDA cattle-on-feed report Friday afternoon. The agency said cattle and calves on feed for slaughter market in the U.S. for feedlots with capacity of 1,000 head or more totaled 11.7 million head on Nov. 1. The inventory was 2% below year ago. Net placements were the lowest for October since the series began in 1996.
USDA at midday today reported cash cattle trading last week averaged $217.41. That’s $7.65 below the prior week’s USDA average of $225.06. The noon report today showed wholesale boxed beef cutout values lower, with Choice-grade down $1.45 at $370.03, while Select-grade lost 66 cents to $356.32. Movement at midday was decent at 73 loads. The Choice-Select spread is presently $13.71.
Technical analysis: The live and feeder cattle futures bears have the solid overall near-term technical advantage. Prices are in downtrends on the daily bar charts. The next upside price objective for the live cattle bulls is to close February futures above resistance at last week’s high of $223.05. The next downside technical objective for the bears is closing prices below solid technical support at $200.00. First resistance is seen at $210.00 and then at $215.00. First support is seen at $205.00 and then at $200.00.
The next upside price objective for the feeder bulls is to close January futures prices above technical resistance at last week’s high of $328.075. The next downside price objective for the bears is to close prices below solid technical support at $290.00. First resistance is seen at $310.00 and then at $315.00. First support is seen at $300.00 and then at $295.00.
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.