Hogs
Price action: February lean hog futures closed $1.55 lower to $84.375.
Fundamental Analysis: Lean hog futures underwent heavy selling pressure, negating most of Friday’s gain as positioning ahead of this afternoon’s reports drove trade. After moving to a for-the-move high on Friday, losses in cutout, led by a $10.10 drop in bellies, also undercut hog futures today. Cutout fell $3.56 to $93.72 this morning while movement firmed to 166.06 loads. Movement fell to light levels last week as purchases for holiday specials slowed, but movement firming on today’s price break is a sign of strong demand under the market.
Traders will look to this afternoon’s USDA Hog’s & Pigs Report, which is expected to show the U.S. hog herd up 0.1% from year-ago at 75.536 million head. The breeding herd inventory is anticipated to be about equal to last year, while market hog numbers are seen up 0.1%. After fourth-quarter slaughter ran under levels implied by the September H&P Report, some downward revisions are expected to past data.
The monthly USDA Cold Storage Report will be released at the same time, detailing frozen stocks at the end of November. The five-year average is a 37-million-lb. decline in pork stocks during the month.
The CME lean hog index is up another 14 cents to $84.35 as of Dec. 19, marking gains in five of the last seven days. The preliminary calculation puts the index up another 40 cents to $84.75 tomorrow, which would be the largest gain since the index posted the Dec. 9 low.
Technical Analysis: February lean hog futures saw staunch selling pressure as bears retain the near-term technical advantage. Buyers limited losses in the latter half of the session, closing prices back above the 40-day moving average, which marks interim support at $84.35. Additional support lies at the psychological $84.00 mark, then the intraday low of $83.35. Bulls are looking to overcome psychological $85.00 resistance before tackling Friday’s high of $86.00.
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 95 cents to $187.45 and near the session low. January feeder cattle rose $1.00 to $256.60 and nearer the session high.
Fundamental analysis: Some technical selling pressure was featured in live cattle futures today as the bulls appear to have become near-term exhausted, judging by recent price action. Feeder cattle saw gains today due in part to the screw worm situation restricting cattle imports from Mexico.
Last Friday’s monthly USDA cattle-on-feed report was deemed mostly neutral by traders. The agency said there were 11.982 million head of cattle in large feedlots (1,000-plus head) as of Dec. 1, down 34,000 head (0.3%) from year-ago. Placements declined 3.7% and marketings fell 1.5% from November of 2023. This afternoon USDA will issue its monthly cold storage report, showing U.S. meat stocks at the end of November. The five-year average is a 13-million-lb. increase in beef stocks.
Last week’s cash cattle trading cattle average was $194.73, up from $194.31 the week prior. The noon report today showed wholesale boxed beef values mixed, with Choice down 80 cents to $315.05 and Select up $1.92 to $287.33. The Choice-Select spread is presently at $27.22. Movement at midday was light at 32 loads.
Technical analysis: The live cattle futures bulls have become exhausted to suggest a market top is in place. The next upside price objective for the live cattle bulls is to close February futures above solid resistance at the December high of $193.225. 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 Friday’s high of $186.60 and then at $188.00. First support is seen at last week’s low of $186.275 and then at $185.00.
The feeder cattle futures bulls have the overall near-term technical advantage but have faded recently. The next upside price objective for the feeder bulls is to close January futures prices above technical resistance at the December high of $261.20. The next downside price objective for the bears is to close prices below solid technical support at $250.00. First resistance is seen at $258.35 and then at $260.00. First support is seen at today’s low of $255.40 and then at last week’s low of $253.80.
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.