Hogs
Price action: February lean hog futures plunged $2.05 to $83.55 and settled nearer session lows.
Fundamental analysis: February lean hog futures underwent persistent selling pressure today, negating Friday’s rally and closing at the lowest price since Nov. 19. Friday’s rejection off moving average resistance likely gave bears confidence to push prices lower today. Resurgent weakness in the cash market likely played a role in today’s selling pressure as well. After seeing a few days of modest strength last week, cash prices resumed their seasonal downtrend, falling a penny to $83.90 as of Dec. 12. The preliminary calculation puts the index down another 6 cents to $83.84. February futures are now trading at a discount to the cash index, indicating traders anticipate continued weakness in the index into the new year, which is fairly common. Pork cutout climbed another $2.27 to $97.08 at midsession today. If sustained this afternoon, that would be the highest quote since Nov. 15. All cuts posted gains this morning, with an $11.80 surge in ribs leading the way higher. Strength in cutout could mitigate losses in futures, similar to how cutout supported the index in October and early November.
Technical analysis: February lean hog futures saw persistent selling pressure today as bears retain a slight technical advantage. Prices rejected off converged 10-day and 20-day moving average resistance at $85.25 and turned sharply lower. February futures closed below the 40-day moving average, currently at $84.40, which had capped losses all last week, and will now mark key resistance. Support comes in at $82.10 on continued selling pressure, then $81.15.
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 $2.05 to $189.975, near the session low after hitting a nine-month high early on. January feeder cattle fell $2.10 to $255.55 and nearer the session low.
Fundamental analysis: Profit-taking pressure was featured in the cattle futures markets today, despite still-solid cash market fundamentals, including still-strong consumer demand for beef. Today’s price action in live cattle futures begins to suggest the bulls are exhausted, but they have shown resilience in the recent past.
Cash cattle prices last week gained for a fourth consecutive week, with the average trade at $194.31, up $3.41 from the week prior. Given the approaching holidays, we look for cash cattle trade this week to come in steady-weaker. The price gains in cash cattle have occurred despite beef packer margins in the red. That suggests packers have become short-bought through year-end. With holiday-shortened cattle slaughter levels in two of the next three weeks, our cash sources say packers could pull back their cash cattle bids for this week. The noon report today showed wholesale boxed beef values mixed, with Choice down 72 cents to $315.67, while Select jumped another $5.71 to $289.57. Movement at midday was 53 loads.
Cattle futures markets may see limited selling interest in the near term due to reports cattle imports into the U.S. from Mexico will not begin until next year. Despite earlier speculation, USDA said Friday that Mexican cattle imports under new protocols won’t resume until early 2025.
Technical analysis: Today’s price action in February live cattle scored a big and bearish “outside day” down, suggesting the bulls have become exhausted. The live cattle futures bulls still have the overall near-term technical advantage. 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 $192.00 and then at today’s high of $193.225. First support is seen at today’s low of $189.75 and then at $188.00.
Feeder cattle futures bulls have the overall near-term technical advantage but there are still resistance levels just above the market. 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 $257.50 and then at today’s high of $258.90. First support is seen at $254.55 and then at $253.00.
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.