Livestock Analysis | November 16, 2023
Price action: Hog futures proved well-supported in late Thursday trading. Nearby December led the way higher with a 42.5 cent rise to $71.475.
Fundamental analysis: Cash hog and wholesale pork markets proved weak Thursday morning, but hog futures closed modestly higher on the day. That was particularly surprising given the big losses posted by the cattle and feeder markets today. After having stabilized just above $76.00 over the past few days, as exemplified by today’s official quote for Tuesday at $75.06, down 7 cents, today’s preliminary quote for Wednesday fell 38 cents to $75.68. This might be seen as marking the onset of fresh seasonal weakness.
After having dipped to $86.82 yesterday afternoon, the noon Thursday quote for pork cutout fell another $1.03 to $85.79, which essentially matched the fall low of $85.73 posted Oct. 26. That might reflect general anticipation of an excess of pork being produced this week as packers look to accelerate activity ahead of next week’s holiday-shortened schedule. On the other hand, given the shortage of ham and whole turkey stocks, we doubt this morning’s $4.98 drop in primal ham values will persist through the end of the day, which could translate into a firmer pork market close.
Technical analysis: Bulls seem to hold the short-term technical advantage in December lean hog futures, especially after bears proved unable to sustain the morning dip below support at the contract’s 40- and 20-day moving averages near $70.69 and $70.58, respectively. Their inability to mount a serious test of the psychological $70.00 level (as indicated by the daily low at $70.10) also suggests solid support under the market. The high-range close just below the daily high, and initial resistance, at $71.60 suggests bulls will test that level tomorrow. Stiffer resistance at the 10-day moving average near $72.00 is likely backed by Monday’s high at $73.80, then last week’s top at $74.28. A move above that point would have bulls targeting $75.00, then the psychological $80.00 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 November.
Price action: December live cattle futures dropped $3.025 to $174.75, settling near session lows. January feeder cattle futures settled $3.40 lower to $227.50, while November feeders went off the board at $229.375, down 5 cents on the session.
Fundamental analysis: Live cattle futures plunged as commodities as a whole sank, giving up the past two days of gains. Part of today’s losses can be attributed to unconfirmed rumors that Tyson Foods was hacked, reminding traders of the short-term bearish impact of a JBS hack in May 21 that disabled operations. Crude oil futures weighed heavily on commodities today, despite a relatively steady equity market and supportive U.S. dollar index and bonds. Front-month crude oil futures traded to the lowest level in over four months.
There continues to be minimal cash cattle trade ahead of tomorrow’s Cattle on Feed Report, which is expected to show the Nov. 1 feedlot inventory up 1.8% from year-ago at 11.907 million head, according to a Reuters survey. Placements are expected to jump 4.9% above year-ago to 2.203 million head, though marketings are expected to fall 2.1% to 1.766 million head. The average cash price for cattle this week is $178.18, down $2.63 from a week-ago at this time. Following weak futures trade today, there are reports of cash cattle trade taking place in the Southern Plains around $178, $2 to $3 lower than last week.
Wholesale beef prices were mixed at midsession, though loads were down significantly from the last couple of days. Choice cutout fell $1.44 to $294.89 while Select rose 93 cents to $268.75. Weakness seen in the wholesale market has weighed heavily on futures, and cutout continues to fall from prior support at $300.00 and $275.00 for Choice and Select, respectively.
November feeders went off the board today at $239.375, falling 5 cents on the session. The contract traded sideways over the past week despite holding a premium to the cash index, which saw the smallest drop since Nov. 7 today (as of Nov. 15). November futures will cash settle against the index when today’s quote is released Friday.
Technical analysis: December live cattle futures remain in a firm, nearly two-month downtrend on the daily bar chart. Bulls are seeking to hold prices above initial support at today’s low of $174.375, with backing from $174.25, then last week’s low of $173.15, which coincides with downtrend support. Bears are seeking to defend resistance at $176.00 on a bout of corrective buying, with backing from the 10-day moving average, currently at $177.40, which limited gains this week.
January feeder cattle futures continue to trade in a steep downtrend on the daily bar chart. Bulls gave up the past two days of gains, with 10-day moving average resistance, currently at $230.75, limiting gains. This is backed by resistance at $233.00. Bears are eyeing a test of support at the psychological $225.00 level, backed by last week’s low of $223.625.
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 November.
