Hogs
Price action: February lean hog futures surged $1.625 to $87.95 and closed on session highs. Nearby December futures climbed $1.15 to $83.225.
Fundamental analysis: February hogs made up most of Friday’s loss as strength in pork cutout led futures higher. After posting a fresh seasonal low Wednesday of last week, pork cutout has posted gains for two consecutive days, rising by $2.95 to $93.26 at midsession, led by strength in hams, picnics and loins. Movement totaled 143.36 loads this morning, about average with recent Mondays. The recent strength in futures has tightened discounts held to the cash market in the December contract and extended premiums held to the index in the February contract. Traders are clearly anticipating a low in the cash market coming sooner than later and recent improvements to consumer demand to persist. The CME lean hog index is down another 30 cents to $85.21 as of Nov. 27, though the preliminary calculation puts the index down 85 cents to $84.36 tomorrow. That would mark the steepest single-day loss since Aug. 9. A few more days of similar daily losses in the index would be hard to ignore considering December futures ended the day just $1.135 below tomorrow’s index quote.
Technical analysis: February lean hog futures posted strong gains today as bulls maintain full control of the technical advantage. Bulls next objective is closing prices above $88.00 resistance, which is backed by the contract high-close of $88.275 then the Nov. 27 contract high of $89.60. Meanwhile, selling pressure finds support at $86.90 then the 10-day moving average at $86.30, which capped the most recent pullback.
What to do: Get current with feed coverage. Carry all production risk in the cash market for now.
Hedgers: You have 50% of fourth-quarter production hedged in December $84.00 put options at $2.075 and 50% of first-quarter production hedged in February $84.00 puts at $3.35.
Feed needs: You have all soymeal needs in the cash market through the third week of January. You should also have all corn-for-feed needs covered in the cash market through mid-December.
Cattle
Price action: February live cattle fell 70 cents to $187.925, nearer the daily low. January feeder cattle fell $2.625 to $256.85, nearer the session low after hitting a five-month high early on.
Fundamental analysis: Some technical selling pressure and profit taking were featured in the cattle futures markets today. Also, some traders reckon the recent cash cattle market strength may end as packers have fresh contracted supplies available at the start of the month. Last week’s cash cattle trading averaged $189.97, which is up $3.58 from the week prior. However, the seasonal trend for cash cattle prices is down for the next two to three weeks.
The feeder market had been supported by the screwworm outbreak and the threat of tariffs on Mexican cattle. Also, feeder cattle supplies are tightening.
The noon report today showed Choice-grade boxed beef prices rose $1.33 to $311.85, while Select grade gained $2.46 to $276.76. Movement at midday was light at 24 loads. The Choice-Select spread remains seasonally wide, at $35.09, suggesting supplies of quality market-ready animals remain light.
Technical analysis: February live cattle scored a bearish “outside day” down on the daily bar chart. The live cattle futures bulls still have the overall near-term technical advantage but trading has turned choppy. The next upside price objective for the live cattle bulls is to close February futures above solid resistance at the October high of $190.325. The next downside technical objective for the bears is closing prices below solid technical support at the November low of $184.40. First resistance is seen at today’s high of $189.375 and then at $190.325. First support is seen at last week’s low of $187.00 and then at $186.00.
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 $252.00. First resistance is seen at $259.00 and then at today’s high of $261.20. First support is seen at today’s low of $255.575 and then at $254.00.
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 soymeal needs in the cash market through the third week of January. You should also have all corn-for-feed needs covered in the cash market through mid-December.