Hogs
Price action: Hog futures traded mixed Thursday. The expiring December contract slipping 7.5 cents to $82.425, while most-active February ended the day unchanged to $86.35 while the deferred contracts posted modest gains.
Fundamental analysis: Hog traders continue trying to gauge the potential for seasonal price weakness over the next few weeks. History suggests next week’s hog supplies and slaughter total will mark the largest of the year. Meanwhile, grocers will likely wrap up the bulk of their planned ham purchases for holiday dinner entrees. Given the tendency for seasonal demand weakness for the other cuts, this combination of forces often drags cash and wholesale prices lower. It’s been most common in recent years for cash hog prices to post an annual low between Christmas and New Years, but that seems unlikely given current prices and the fact that the hog index began the year trading below $70.00. On the other hand, a dip below the market’s October low at $83.84 seems highly probable. Indeed, with Tuesday’s official quote matching expectations at $84.07, Wednesday’s preliminary figure came in at $83.93. December futures indicate the loss of another $1.20 or so over the coming week.
Such a drop would probably entail continued wholesale losses. Pork cutout did edge up 4 cents to $89.64 at noon today, but the industry is almost surely anticipating further short-term weakness. Nevertheless, given ongoing year-to-year reductions in both hog supplies and weights, as well as indications of persistently robust consumer demand, downside price potential seems limited.
Technical analysis: Bulls still appear to hold the short-term technical advantage in February lean hog futures, although they proved unable to sustain an intraday push above initial resistance at the contract’s 10-day moving average near $86.73. Expect additional resistance at recent highs of $87.67, $89.28 and $89.60, as well as the psychological $90.00 level. Today’s low placed initial support at $86.325, with strong backing being offered by the 20-day moving average near $85.64. Strong support represented by the 40-day moving average comes in at $84.36. A close below that point would have bears targeting the psychological $80.00 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: 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 $2.0 to $186.325. January feeder cattle fell $2.025 to $254.9250. Both markets closed nearer their session lows and hit two-week lows.
Fundamental analysis: Fresh technical selling was featured today as the near-term chart postures for both live cattle and feeder cattle futures markets have deteriorated to begin suggesting market tops are in place.
Traders were awaiting direction from the cash cattle market. There was light cash trading at $190.00 (769 head officially) in Iowa and Kansas on Wednesday. That would suggest higher cash trade is likely at some point, unless packers opt to not buy many cattle this week. Packers are in no hurry to aggressively bid for supplies given negative margins and recent solid purchases. The bulk of cash cattle trade is likely to occur Friday.
The noon report today showed Choice-grade boxed beef prices dipped 31 cents to $308.02, while Select grade rose 47 cents to $278.17. Movement at midday was decent at 60 loads.
USDA this morning reported U.S. beef export sales of 100 MT for 2024 — a marketing-year low.
Technical analysis: The cattle futures bulls still have the overall near-term technical advantage but are fading, suggesting market tops are in place. 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 $187.50 and then at today’s high of $188.475. First support is seen at $185.00 and then at $184.40.
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 $250.00. First resistance is seen at today’s high of $257.975 and then at $259.00. First support is seen at today’s low of $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.