Livestock Analysis | December 13, 2023
Price action: February lean hog futures dropped $1.525 to $66.725, settling nearer session lows. December futures, which expire at noon tomorrow, rose 10 cents to $67.925.
Fundamental analysis: Lean hog futures showed recent weakness on this morning’s open, though rising cash fundamentals limited selling pressure as the day went on. The CME lean hog index fell 23 cents to $67.70 today, a fresh seasonal low. The preliminary calculation for tomorrow actually puts the index 43 cents higher to $68.13. The index has shown intermittent strength, so follow through strength will be necessary before traders are convinced a seasonally low is in place, especially with the persistent weakness seen through the New Year the past couple of years. The December future expires at noon tomorrow, which will cash settle against the CME lean hog index for the same date, which will be released on Monday.
Wholesale pork prices also showed relative strength at midsession. Cutout values rose 38 cents to $84.34, led by strength in picnics and ribs, while bellies fell. Movement remains quite firm, with 196.77 loads changing hands this morning. That points to continued robust grocer demand.
Technical analysis: February lean hog futures fell, marking the tenth consecutive session of alternating between higher and lower closes. Bears retain full control of the near-term technical advantage. Bulls are targeting initial resistance at $67.925, with backing from the 10-day moving average at $68.70, then the psychological $70.00 mark. Initial support lies at $66.225, which is backed by $65.80 then the psychological $65.00 level.
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: After trading on both sides of unchanged, cattle futures moved lower Wednesday. Expiring December live cattle fell 75 cents to $166.95, while most-active February dropped $1.375 to $167.225. January feeder futures tumbled $1.8075 to $217.375.
Fundamental analysis: Early-week wholesale strength likely played a role in concurrent gains in cattle and feeder futures, whereas today’s slippage at the cash and wholesale levels probably undercut futures. Choice cutout advanced $2.35 to $292.78 Tuesday but sagged 40 cents to $292.38 at noon today. That sapped bullish confidence, as did late-morning news that cash prices had slipped in light trading yesterday. Last week’s cash average came in at $169.99, with big late-week losses suggesting producers had cleaned up supplies in their lots and possibly set the stage for renewed cash firmness. However, a few head traded at $168.00 in both Iowa and Nebraska yesterday, thereby potentially setting the stage for similar losses across the country this week.
Ongoing cash market declines probably weighed on feeder futures as well. The feeder index was stated at $216.05 Tuesday afternoon, marking a $2.32 daily drop and its lowest quote since June 1. Moreover, the $6.00-plus drop since last Wednesday, as well as last week’s fed cattle losses, suggest more of the same in the days just ahead.
Technical analysis: Bears continue to enjoy the short-term technical advantage in February live cattle futures. However, today’s drop did not carry the market significantly back below initial support at the contract’s 10-day moving average near $167.27. That leaves the door open to a potential follow-through to the three-day advance posted from last Friday to Tuesday. Initial resistance stands at today’s high of $169.00, which is backed by the psychological $170.00 level as well as the 20-day moving average near $170.88. A breakout above the latter point would open the door to a test of important 40-day moving average resistance near $176.47. Today’s low at $167.175 reinforces support around the 10-day moving average, with further backing provided by Dec. 3 and Dec. 4 lows at $166.625 and $166.775, respectively. Penetration of that area would have bears again targeting the Dec. 7 low at $162.675.
Bears also maintained their advantage in January feeder futures, with bulls once again proving unable to penetrate 20-day moving average resistance near $219.88. A push above that point, as well as psychological resistance at $220.00 would have bulls looking to challenge the $125.00 level, then the 40-day moving average near $227.94. Today’s low places initial support at $216.925, with stouter support likely at the 10-day moving average near $215.00. A drop below that point would open the door to a fresh test of the Dec. 4 low at $209.15.
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.
