Hogs
Price action: February lean hog futures sunk $1.125 to $79.65 and near session lows, while deferred contracts posted modest gains.
Fundamental analysis: Lean hog futures broke to a fresh for-the-move low as disappointing cash trade continues to drive the market lower. After posting modest strength in December, the CME lean hog index broke lower to start the new year, falling 87 cents to $83.12 as of Jan. 2 and marking a fresh seasonal low. Continued weakness is expected with the preliminary calculation putting the index another $1.11 lower to $82.01 when it is officially released tomorrow. Traders anticipate continued weakness in the cash market as February futures closed today $2.36 below tomorrow’s quote for the index. Weakness in pork continues to weigh heavily on cash hog prices. At noon, pork cutout fell another $1.57 to $87.97, led lower by losses in all cuts except bellies, which posted an impressive $6.37 gain. In the same way that higher pork prices bolstered strength in the cash hog market in December, weakness in pork cutout has undercut the cash market so far in January.
Technical analysis: February lean hog futures boasted a fresh for-the-move low today as bears continue to retain the near-term technical advantage. The 200-day moving average provided modest support at $80.05 though failed later in the session, marking that as initial resistance. Strength above that mark targets $81.30 resistance, then the 10-day moving average at $82.10. Support stems from $79.30 then $78.70 on continued selling pressure.
What to do: Get current with feed coverage.
Hedgers: You have 50% of first-quarter production hedged in February $84.00 puts at $3.35.
Feed needs: You have all corn-for-feed needs covered in the cash market through the end of December. You have all soymeal needs in the cash market through the third week of January.
Cattle
Price action: February live cattle rose $1.15 to $195.20, near mid-range and hit a nine-month high early on. March feeder cattle rose $1.375 to $265.55 and near mid-range.
Fundamental analysis: Friendly charts and solid cash market fundamentals continue to fuel buying interest in the futures markets. Last week’s average cash cattle trading price was $198.93, up $4.12. Packers paid up for a seventh straight week and last week’s average price topped the record high from July of 2024. Despite negative cutting margins, packers have had to raise their cash bids to secure product. We look for steady-firmer cash cattle trade later this week, as packers remain in chase mode. The discount of February live cattle futures to cash will also limit the downside in futures in the near term.
The noon report today showed wholesale boxed beef values were higher again, with Choice grade $2.00 higher to $327.24, while Select rose $4.40 to $301.12. Movement at midday was 57 loads.
The U.S. ban on feeder cattle imports from Mexico that was implemented in late November due to the detection of New World screwworm (NWS) in Chiapas, Mexico, remains in place and a supportive fundamental for the feeder cattle futures market.
Technical analysis: Cattle futures bulls have the solid near-term technical advantage. Prices are in seven-week-old uptrends on the daily bar charts. The next upside price objective for the live cattle bulls is to close February futures above solid resistance at the contract high of $199.575. The next downside technical objective for the bears is closing prices below solid technical support at $188.00. First resistance is seen at today’s high of $196.325 and then at $198.00. First support is seen at Friday’s low of $193.40 and then at $192.00. The next upside price objective for the feeder bulls is to close March futures prices above technical resistance at $270.00. The next downside price objective for the bears is to close prices below solid technical support at $258.00. First resistance is seen at the contract high of $267.75 and then at $269.00. First support is seen at Friday’s low of $263.25 and then at $262.00.
What to do: Get current with feed coverage. Carry all production risk in the cash market for now.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: You have all corn-for-feed needs covered in the cash market through the end of December. You have all soymeal needs in the cash market through the third week of January.