Livestock Analysis | February 6, 2024
Price action: April lean hogs closed down 95 cents at $81.25, nearer the session low and hit a two-week low.
Fundamental analysis: The lean hog futures saw more corrective, profit-taking pressure from recent gains that pushed prices to a four-week high last week. Hog traders were disappointed the futures market got no support from solid rallies in the live and feeder cattle futures markets today.
Don’t be surprised to see lean hog futures prices post a decent rebound before the end of this week, as the market is now short-term oversold, technically, and the cash hog market fundamentals are improving. The latest CME lean hog index is up another 44 cents to $73.56 as of Feb. 2 and has risen $8.51 since the beginning of this year. Wednesday’s projected lean hog index price is up 30 cents at $73.86, now 38.5 cents above the February futures. The noon report today showed pork cutout value fell another 96 cents to $86.64, led by a decline in bellies. Movement at midday was an impressive 193.77 loads.
Technical analysis: The lean hog futures bulls still have the overall near-term technical advantage but are fading. A four-week-old uptrend on the daily bar chart is now in jeopardy. The next upside price objective for the hog bulls is to close April prices above solid chart resistance at the January high of $85.925. The next downside price objective for the bears is closing prices below solid technical support at $79.00. First resistance is seen at today’s high of $82.15 and then at this week’s high of $83.425. First support is seen at today’s low of $81.00 and then at $80.00.
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 soybean meal needs covered in the cash market through February.
Price action: April live cattle futures jumped $3.725 to $186.075, settling near session highs. March feeder futures surged $3.925 to $246.675, also settling near session highs.
Fundamental analysis: Cattle futures surged to the highest level since early November as buyers quickly erased Monday’s losses. Prices showed relentless strength despite relatively quiet outside markets. Grains traded near unchanged to modestly higher and equity markets chopped near unchanged as well. That makes today’s gains in cattle even more impressive, a sign of a healthy market. Cash cattle trade has yet to take place this week as packers are likely to push negotiations into the latter half of the week once again. Packer margins have quickly returned to the red as cattle prices have risen for three consecutive weeks and wholesale beef prices slip from the Jan. 23 peak. That could limit packer demand in the meantime, though wholesale beef prices showed impressive strength at midsession. Choice cutout rose $2.24 to $295.72 and Select rose 43 cents to $284.20. Movement was lighter as 55 loads.
Feeders led the cattle market lower on Monday and fats carried feeders higher today. Feeder bulls are likely hesitant as demand seems to be picking up in corn, despite futures trading near contract lows this afternoon. Feeder bulls appear hesitant and are likely to await fats guidance. Deferred futures implying gains in the feeder index to record highs later this year are also likely limiting buying interest and causing significantly more hedge pressure than usual.
Technical analysis: April live cattle futures surged to three-month highs. Bulls continue to hold full control of the technical advantage. Initial resistance stands at $186.575 with further backing at $187.55 then $188.775. Bulls are seeking to hold support at the psychological $185.00 mark, $184.30, then the 10-day moving average at $182.00. Some profit-taking is possible as prices have become extended over moving average support, but bulls continue to show robust strength.
March feeder futures posted a fresh for-the-move high as bulls continue to maintain the technical advantage. Initial resistance stands at $247.10 with further backing from $247.50, $249.00, then the psychological $250.00 mark. Meanwhile, support stands at $245.00, $244.875, then the 10-day moving average at $241.10.
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 soybean meal needs covered in the cash market through February.
