Livestock Analysis | December 11, 2023
Price action: December lean hog futures settled 17.5 cents lower at $68.25. February futures dropped $1.65 to $67.325.
Fundamental analysis: Lean hog futures tried to work higher early in today’s session but buyer interest proved light and the market rolled over. Fundamental pressure came from continued weakness in the cash hog market, as the seasonal slide in prices continues. Perhaps the most telling aspect of today’s price action was the move back below the cash index in February lean hog futures, which will assume lead-month status after the December contract expires on Thursday. If traders maintain or build that discount it would signal their expectations the seasonal cash decline would extend into early 2024.
While the cash market weakens, the wholesale pork market has stabilized. The pork cutout value firmed $1.83 in morning trade, led by a $17.00-plus jump in cash bellies. Key will be whether that price strength is extended through afternoon trade. Often, big morning price moves struggle to be sustained.
Today’s estimated slaughter was 462,000 head, down 21,000 head from week-ago and 27,000 head from year-ago. Big slaughter numbers and heavy carcasses have been weighing on the cash market, so traders will be watching to see if today’s slaughter slowdown continues or was an isolated event.
Technical analysis: February lean hog futures narrowly averted a bearish outside day down on the daily chart. Today’s low at $66.725 is initial support, with more critical support at the Nov. 28 contract low at $65.80. Near-term resistance is at the 5-day moving average of $68.545, the 10-day average near $69.425 and today’s spike high at $70.225.
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 soymeal needs covered in the cash market through December.
Price action: February live cattle rose $2.175 to $167.90, closing near the session high. January feeder cattle gained $2.65 at $217.95 and near the session high.
Fundamental analysis: Short covering was featured in live and feeder cattle futures markets today after the markets last Thursday hit new lows for the year. Two days in a row of solid gains now have given the bulls some confidence that near-term market bottoms are now in place. Better risk appetite in the marketplace to start the trading week, as U.S. stock indexes hit multi-month highs, also worked in favor of the cattle market bulls, suggesting better consumer confidence heading into the holidays.
On the negative side, cash cattle prices are likely to remain under some pressure unless futures markets continue to rally this week. More gains in futures this week would then likely suggest steady cash cattle trading later this week. Last week’s average cash cattle trading price was $169.94, which is down $4.51 from the week prior and the lowest cash average since the end of March. The noon report showed wholesale beef cutout values up, with Choice grade gaining $2.44 to $290.45, while Select grade rose $3.05 to $260.95, narrowing the Choice/Select spread to $29.50. Movement at midday was modest at 63 loads.
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 soymeal needs covered in the cash market through December.
