Livestock Analysis | November 6, 2023
Price action: December lean hog figures rallied 65 cents to $72.40, settling nearer the session high.
Fundamental analysis: Lean hog futures continue to surge higher, despite a flailing cattle market. Traders continue to believe the seasonal bottom in the CME lean hog index will come earlier than the past few years as December futures continue to narrow the spread to the index. Despite this, the index shows little sign of an early bottom, and selling even accelerated compared to the two prior days as the index fell 39 cents to $76.45 today (as of Nov. 2). USDA reported packer submission problems, so the preliminary calculation for tomorrow’s quote is unavailable. Meanwhile, wholesale pork prices surged at midsession to the highest level since Oct. 2 as carcass values leapt $9.16 to $96.44 with gains in each of the individual cuts. Bellies and picnics led the way higher, rising $34.08 and $14.81, respectively. It is likely that at least a portion of these gains will be given back when afternoon trade is reported, though surging pork prices likely lent a helping hand to lean hog futures bulls today.
Technical analysis: December lean hog futures continued in a steep uptrend on the daily bar chart Monday. Bulls are seeking a daily close above the 100-day moving average, currently at $73.125, which capped gains last week. Further buying has bulls targeting resistance at $74.45, which acted as stiff support in early September, loss of which led to the late September and early October sell off. Uptrend support will be extended to $72.25 for tomorrow’s session. Bulls are seeking to keep prices above this in order to keep the recent two-week uptrend in place. Bears are seeking a break of support at $71.50, further backed by the 40-day moving average at $71.15.
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 dropped $2.55 to $181.325 and near the session low. January feeder cattle fell $3.325 to $236.425 and near the session low.
Fundamental analysis: Speculative and chart-based selling pressure were featured to start the trading week in the cattle futures markets. Slightly weakening cash and beef market fundamentals also prompted selling pressure in futures today.
Cash cattle traded steady to firmer last Friday. Last week’s cash cattle trade averaged $184.89--up 87 cents. We look for the bulk of cash cattle trading to come late this week. Some feedlot operators passed on steady cash bids last week, opting to carry forward to this week, which will increase showlist numbers.
The noon report showed wholesale beef prices fell again today, with Choice grade down 93 cents to $301.41, while Select grade lost 97 cents to $271.04, taking the Choice-Select spread to $30.37. Movement at midday was light at 36 loads.
There is already some scattered talk among cattle futures traders that this month’s USDA Cattle on Feed Report will again favor the bears.
Technical analysis: December live cattle futures prices gapped lower on the daily bar chart today to keep alive a six-week-old downtrend on the daily bar chart. The bears have the overall near-term technical advantage. The next upside price objective for the bulls is to close December futures above solid resistance at $187.00. The next downside technical objective for the bears is closing prices below solid technical support at the October low of $177.30. First resistance is seen at $182.50 and then at today’s high of $183.275. First support is seen at $180.00 and then at $179.00.
The feeder cattle futures bears have the overall firm near-term technical advantage. A seven-week-old downtrend is in place on the daily bar chart. The next upside price objective for the feeder bulls is to close January futures prices above technical resistance at $245.00. The next downside price objective for the bears is to close prices below solid technical support at $230.00. First resistance is seen at $238.00 and then at $239.00. First support is seen at $235.00 and then at the October low of $233.35.
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.
