Hogs
Price action: In an abbreviated trading session, February lean hogs were unchanged at $84.375, ending near the daily high.
Fundamental analysis: The lean hog futures market today saw some buying support come from an improving cash hog market. The latest CME lean hog index is up another 40 cents to $84.75 as of Dec. 20--with gains in six of the past eight sessions. During that span, the index has risen $1.42 from what is likely a seasonal low.
Gains in hog futures were limited today after Monday afternoon’s USDA quarterly Hogs & Pigs Report leaned slightly bearish. The data showed the Dec. 1 U.S. hog herd at 75.845 million head, up 384,000 head (0.5%) from last year and 309,000 more than the average pre-report trade estimate. The breeding herd at 6.004 million head was virtually unchanged. The market hog inventory of 69.841 million head increased 378,000 head (0.5%) from last year. The overall report suggests hog slaughter will run slightly below year-ago levels through winter and then expand to around 1% above last year’s levels from spring into early summer.
Technical analysis: February lean hog prices are trending down on the daily chart to suggest a market top is in place. The next upside price objective for the hog bulls is to close February prices above solid chart resistance at the contract high of $89.60. The next downside price objective for the bears is closing prices below solid technical support at $80.00. First resistance is seen at $85.00 and then at this week’s high of $86.075. First support is seen at $83.00 and then at the November low of $82.10.
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 75 cents to $187.375, marking a mid-range close.
Fundamental Analysis: Live cattle futures saw a quiet day of low volume trade, with February futures trading on either side of unchanged. There was little catalyst for futures today as reports from USDA were either delayed or nonexistent , which left traders sitting on their hands for the most part as volume across the curve was about a third of what has been normal. Traders are anticipating a downturn in the cash cattle market, evident by futures holding steep discounts to the cash market. Holiday shortened slaughter runs and fresh contracted supplies at the turn of the calendar further bolster that idea, but traders will keep a close eye on the cash market for any persistent strength.
Technical Analysis: February live cattle futures saw action on either side of unchanged as the long-term bias remains fairly neutral. The 40-day moving average at $187.80 remains persistent resistance, while additional strength targets resistance at $188.35. Meanwhile, selling pressure finds support at $186.75 then $185.90.
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.