Livestock Analysis | December 14, 2023
Price action: The December hog contract expired at $67.175 at noon today, down 75 cents from Wednesday. In contrast, February futures led the 2024 contracts sharply higher, leaping $3.75 to $70.475.
Fundamental analysis: After remaining under consistent downward pressure over the past two weeks, deferred hog futures turned sharply higher Thursday. Traders may have been encouraged by the hog index officially rising 43 cents to $68.13 Tuesday, thinking it marked the start of a seasonal advance, despite Wednesday’s preliminary figure reversing downward 38 cents to $67.75. Bulls may also be garnering encouragement from the wholesale market, which has exhibited considerable stability around $84.00 this week (cutout was up 29 cents to $84.22 at noon). It was rather impressive that the midsession rise occurred despite a $3.06 drop in primal ham values, since ham prices are likely to come under strong downward pressure next week as grocers complete their buying for hams as holiday dinner entrees.
Bulls might also have been encouraged by the latest weekly export data from the USDA. Last week’s sales figure reached 28,167 metric tons, the largest in five weeks. The shipments figure at 36,077 MT was the largest since mid-May. But we also wonder if traders were encouraged by early projections of what next Friday’s (12/22) USDA Hogs & Pigs report may be indicating for 2024 hog supplies. We think we have had a lot of company in anticipating another significant increase in hog numbers, but credible sources suggesting otherwise would probably spur buying (we have seen no estimates at this time).
Technical analysis: One could certainly argue that today’s jump flipped the short-term technical advantage to bullish, especially after the nearby February contract crushed short-term trendline resistance and closed above its 20-day moving average near $70.28. Look for initial support at that level, along with psychological support at $70.00. A drop below the latter would have bears targeting the 10-day moving average near $68.91, then yesterday’s low of $66.225. Today’s high implies initial resistance at $70.475, with added chart resistance likely near the Dec. 1 high of $72.00, then at the 40-day moving average of $72.10. A breakout above that area would have bulls targeting the psychological $75.00 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: February live cattle rose 70 cents to $167.925 and near mid-range. January feeder cattle gained $1.975 to $219.35, nearer the session low and hit a two-week high early on.
Fundamental analysis: More short covering and perceived bargain buying in the cattle futures markets were featured today, amid significantly improved trader and investor risk appetite in the general marketplace following the surprising pivot Wednesday afternoon by the Federal Reserve to a more accommodative U.S. monetary policy. U.S. stock indexes hit new highs for the year today, with the DJIA hitting a record high.
Only very light cash cattle trade has occurred so far this week at $168.00 in the northern market--around $1.00 to $2.00 lower than last week. Volume has not been enough for a true gauge of this week’s cash cattle market. The noon report showed Choice grade boxed beef prices fell 63 cents to $291.01, while Select grade rose 8 cents to $259.29. Movement at midday was decent at 77 loads. Grocers are likely buying beef for the post-holiday period at this point. Their November price cuts will likely prompt better consumer buying. The Choice-Select spread is presently at $31.72.
USDA this morning reported net U.S. beef sales of 10,600 MT, which were up notably from the previous week and 67% from the four-week average. Net sales totaled 5,100 MT for 2024.
Technical analysis: The live and feeder cattle futures bears have the firm overall near-term technical advantage. Eleven-week-old downtrends are in place on the daily bar charts. However, more gains in the near term would suggest market bottoms are in place. The next upside price objective for the live cattle bulls is to close February futures above solid resistance at $174.00. The next downside technical objective for the bears is closing prices below solid technical support at the contract low of $160.825. First resistance is seen at this week’s high of $169.125 and then at $170.00. First support is seen at Tuesday’s low of $166.10 and then at this week’s low of $164.875. The next upside price objective for the feeder bulls is to close January futures prices above technical resistance at $225.00. The next downside price objective for the bears is to close prices below solid technical support at $200.00. First resistance is seen at today’s high of $221.125 and then at $223.575. First support is seen at Tuesday’s low of $215.30 and then at this week’s low of $213.25.
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.
