Livestock Analysis | December 18, 2023
Price action: February lean futures led the complex lower, falling 32.5 cents to $71.575.
Fundamental analysis: Lean hog futures slipped despite trading on both sides of unchanged, as seasonal weakness continues to weigh on prices. After a brief rise last week, the CME lean hog index made a fresh for-the-move low down 60 cents to $67.15 today (as of Dec. 14). The preliminary calculation puts the index down another 56 cents to $66.59 tomorrow, extending the seasonal weakness. Price action in February futures is likely to be largely dictated by the cash market, as traders have struggled picking a seasonal low thus far, leading to volatility in the weeks leading up to the December contracts expiration. This is further justified by how tightly February futures have traded to the cash index in the past couple of weeks. Paired with lighter volume holiday trade, expect futures to tightly track cash prices for the time being.
While the CME lean hog index continues to flounder, wholesale pork continues to show relative strength. Cutout rose $2.53 to $86.86 at midsession, the highest since Nov. 27. The gains were led by a $19.70 jump in picnics, which likely leads to weaker trade this afternoon, bringing the daily average lower. Movement remains firm at 144.92 loads as grocers continue buying for holiday specials.
Technical analysis: February lean hog futures failed to follow through on last week’s strength, with today’s session giving little guidance for the coming week. Sellers stepped into the market the last two sessions at $71.65, marking that area as initial resistance. Bulls are seeking to close prices above the 40-day moving average, currently at $71.75, with further packing from $73.90. Support stands at $71.00, with backing from $70.42, then the psychological $70.00 mark, with selling likely accelerating below that.
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.
Cattle
Price action: February live cattle rose 27 1/2 cents to $169.625 though settled near the session low. Prices hit a two-week high early on. January feeder cattle closed up $2.275 at $223.175, near mid-range today and hit a three-week high early on.
Fundamental analysis: Feeder cattle led the price strength in the cattle futures markets today, helped out by a drop in corn futures prices to start the trading week. While the cattle futures markets are starting to show signs of bottoming out, the cash cattle market continues to struggle. Cash cattle prices fell for a sixth consecutive week last week. The average cash cattle trading price last week was $168.71, down $1.23 from the week prior. A holiday-shortened slaughter schedule this week may make for weaker cash trade again later this week. The noon report today showed wholesale beef cutout values mixed, as Choice grade fell $2.56 to $289.08 and Select rose $2.47 to $263.29. The Choice/Select spread narrowed to $25.79. Movement at midday was 56 loads.
Technical analysis: The live and feeder cattle futures bears have the overall near-term technical advantage. A three-month-old downtrend is in place on the daily bar chart for February live cattle. However, more gains in the near term would suggest a market bottom is in place. The next upside price objective for the bulls is to close February futures above solid resistance at $175.00. 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 today’s high of $171.00 and then at $172.00. First support is seen at Friday’s low of $166.925 and then at $165.00.
In January feeder cattle futures a three-month-old downtrend on the daily bar chart is now in jeopardy. Recent price gains suggest a market bottom is in place. The next upside price objective for the feeder bulls is to close January futures prices above technical resistance at $232.20. The next downside price objective for the bears is to close prices below solid technical support at the contract low of $209.25. First resistance is seen at today’s high of $225.00 and then at $226.00. First support is seen at today’s low of $221.40 and then at $220.00.
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.
