Livestock Analysis | January 30, 2024
Advice: We advise livestock producers to extend corn-for-feed and soybean meal needs another four weeks in the cash market through February. Be prepared to more aggressively extend coverage if corn and soymeal futures signal major price bottoms.
Price action: April lean hogs closed up $1.475 at $84.90, near mid-range and hit a four-month high early on.
Fundamental analysis: The lean hog futures market was boosted today by more chart-based speculator buying interest. However, today’s mid-range close begins to suggest the bulls have become overextended and the market is due for some consolidation and a corrective pullback. The recent solid rallies in live and feeder cattle futures markets have also encouraged the hog market speculators to play the long side.
Cash market fundamentals remain bullish. The projected CME lean hog index price for Wednesday is up 88 cents at $71.48, which would be the biggest daily gain of the seasonal rally. The surge in futures over the past week has priced February futures around $5.00 above the CME lean hog index, which was last officially quoted up 70 cents to $70.60 (as of Jan. 26). The February contract expires on Feb. 14. The April lean hog futures contract is trading over $15.00 above the cash index, suggesting bullish attitudes among hog traders heading into springtime.
The noon pork report showed cutout value rose 7 cents to $89.14. Gains were limited by a $9.55 drop in bellies. Wholesale pork prices continue to struggle above the $90.00 level. Packers appear to be moving additional pork and driving prices lower, as movement at midday was again decent at 229.45 loads.
Technical analysis: The lean hog futures bulls have the firm overall near-term technical advantage. Prices are trending up on the daily bar chart. However, the market is short-term overbought and due for a corrective pullback soon. The next upside price objective for the hog bulls is to close April prices above solid chart resistance at the June 2023 high of $89.025. The next downside price objective for the bears is closing prices below solid technical support at $81.00. First resistance is seen at the September 2023 high of $86.05 and then at $87.00. First support is seen at $84.00 and then at today’s low of $83.20.
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: NEW ADVICE -- Extend corn-for-feed and soybean meal needs another four weeks in the cash market through February.
Advice: We advise livestock producers to extend corn-for-feed and soybean meal needs another four weeks in the cash market through February. Be prepared to more aggressively extend coverage if corn and soymeal futures signal major price bottoms.
Price action: April live cattle futures rallied 52.5 cents to $181.75, settling nearer session highs. Nearby February futures rallied 65 cents to $178.025. March feeder cattle futures jumped $2.70 to $241.325, closing near session highs.
Fundamental analysis: Feeder cattle led the cattle market higher today, with fats recovering from this morning’s gap lower and closing near the recent high close. Cash cattle trade has been minimal thus far this week, with just 82 head trading hands at $176.00 in Iowa. While light volume, the higher trade to start the week sets precedence for higher trade, which affirms our belief that cash cattle price will continue to trend higher. Packers are not running slaughter plants at full capacity and are purchasing cattle at a slow rate, apparently waiting for fresh contracted supplies that become available on Thursday. Wholesale beef prices continue to consolidate, with Choice hanging just below the $300.00 mark. Choice cutout fell 96 cents to $298.46 while Select rose 38 cents to $289.20. Movement firmed above yesterday’s entire day’s total to 70 loads at midsession. Dressed weights falling from their peak earlier in the year are likely to continue to support wholesale prices, despite plants being able to run uninhibited by weather problems or government holidays in the coming weeks.
Technical analysis: April live cattle futures set a new for-the-move close high today as prices continue to grind higher. Bulls continue to hold full control of the technical advantage. Bulls are seeking to overcome resistance at $182.15 with further backing from $183.45 then the psychological $185.00 mark. Meanwhile, bulls are seeking to hold support at $181.10, the psychological $180.00 mark, then the 10-day moving average at $179.20 on corrective selling.
Feeder futures led the cattle markets higher today. Bulls continue to hold the near-term technical advantage. Bulls are looking to overcome Monday’s high of $241.925, backed by $242.75 then $244.425. Support stands at $240.00, $238.40, then the 10-day moving average at $235.65.
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: NEW ADVICE -- Extend corn-for-feed and soybean meal needs another four weeks in the cash market through February.
