Hogs
Price action: Hog futures traded narrowly Thursday, with the most-active February inching up 10 points to $84.475 and expiring December rising 5 points to $83.55.
Fundamental analysis: Although “tis the season” for hog and pork market weakness, cash hog and wholesale pork values have continued holding up surprisingly well. Again, this firmness likely reflects the unexpected reductions in hog supplies seen this fall, along with sustained consumer demand strength experienced since Independence Day. Pork cutout did slip 83 cents to $92.04 at noon today, but that still marks a significant improvement from early last week when cutout had fallen below $90.00. The cash market is also proving quite firm, as indicated by the CME confirming Tuesday’s official hog index quote at $83.61, up 28 cents, and today’s USDA data indicating Wednesday’s quote will likely rise another 29 cents to $83.92. Conversely, industry insiders apparently expect it to set back over the next two days, since December futures, which expire at noon Friday, imply the cash equivalent price will come in about 40 cents lower when Friday’s official quote is released next Tuesday.
On the other hand, February futures suggest the industry is not expecting much of an early winter advance, since the most-active contract settled only about 60 cents over the preliminary index figure. We are somewhat more optimistic on that score, due largely to the persistent cash and wholesale firmness experienced this fall. The biggest dangers to more of the same are probably a resurgence in hog supplies (versus year-ago levels since seasonal patterns imply hog slaughter will decline from an annual high this week or next to annual lows early next summer) and a reduction in consumer demand. Wednesday’s CPI data raised some concerns on that score.
Technical analysis: The short-term technical advantage in February lean hog futures seems balanced between bulls and bears. The fact that recent slippage has caused the contract to close below its simple 40-day moving average suggests bears have the advantage, but it has remained above the weighted 40-day moving average. This week’s action has highlighted solid support in the $83.75 to $84.00 area. A drop below that range would open the door to a test of the November low at $82.10, then the psychological $80.00 level. Look for initial resistance around the 40-day moving average near $85.00, which in turn is being reinforced by psychological resistance at that point. Expect added resistance near the contract’s 20- and 10-day moving averages near $85.59 and $86.21, respectively. A breakout above the latter point would have bulls targeting the $90.00 level.
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 fell 52 1/2 cents to $190.85, near the session low after hitting an eight-month high early on. January feeder cattle fell 70 cents to $258.35 and near the session low.
Fundamental analysis: The live cattle futures market shot to an eight-month high early on but then backed way off the daily high, to suggest the bulls may now be exhausted. Profit taking from recent gains was featured. Cattle futures prices apparently saw no support today from better cash cattle market fundamentals as the week progresses.
Cash cattle trading Wednesday took place at $1.00 to $2.00 higher, with reports of $3.00 higher in the dressed market, compared to last week’s levels. USDA indicated modest cash cattle trading earlier this week averaging $190.81. Wednesday saw active trading in the $192.00-$195.00 area, with the average coming in at $194.00.
Meantime, today’s noon report showed a big rebound in boxed beef cutout values, with Choice grade up $4.16 at $315.39 and Select gaining $1.93 to $280.04. The Choice-Select spread is presently a historically wide $35.35, suggesting still-tight supplies of quality cattle in feedlots. Movement at midday was good at 92 loads.
Feeder cattle futures have lagged the live cattle futures this week. Earlier this week, USDA reported feeder cattle prices at Oklahoma City fell sharply, by around $15.
USDA reported net U.S. beef export sales of 11,000 MT for 2024, up notably from last week’s disappointing figure and 32% from the four-week average.
Technical analysis: The cattle futures bulls have the firm overall near-term technical advantage. However, the live cattle futures are now short-term overbought and due for a downside correction. The next upside price objective for the live cattle bulls is to close February futures above solid resistance at the March high of $194.85. The next downside technical objective for the bears is closing prices below solid technical support at the December low of $185.90. First resistance is seen at today’s high of $192.70 and then at $194.00. First support is seen at today’s low of $190.775 and then at Wednesday’s low of $188.90.
The next upside price objective for the feeder bulls is to close January futures prices above technical resistance at the May high of $263.425. The next downside price objective for the bears is to close prices below solid technical support at $252.50. First resistance is seen at $260.00 and then at the December high of $261.20. First support is seen at Wednesday’s low of $256.70 and then at last week’s low of $254.55.
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.