Hogs
Price action: February lean hog futures fell 82.5 cents to $86.50, while nearby December futures lost 40 cents to $82.90.
Fundamental Analysis: Lean hog futures underwent selling pressure today but continue to trade in a tight range. Today’s selling did little to negate the recent trend. Traders will keep a close eye on the cash market this week as December futures are poised to go off the board on Friday midday. The CME lean hog index is down another 20 cents to $83.73 as of Dec. 5, breaking the October low and marking the lowest quote since March. The preliminary calculation puts the index down another 27 cents to $83.46 tomorrow. December futures finished today 56 cents below the index, indicating traders belief that the downside is limited in the cash market from here. Their confidence is likely bolstered by recent strength in pork cutout, as cutout has climbed over $5 from last week’s low. Pork cutout was up $2.69 to $93.85 at midsession today, led by strength in ribs and hams, though all cuts except picnics posted gains this morning.
Technical Analysis: February lean hog futures saw modest selling pressure today. Bulls continue to hold a slight technical advantage, though prices have traded sideways the last couple of weeks. Resistance stems from $86.65, the 10-day moving average, which is firmly backed by $88.00. Continued selling pressure finds support at $86.00 then Friday’s low of $85.375.
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 rose 85 cents to $187.025, near mid-range and hit a three-week low early on. January feeder cattle fell 2 1/2 cents to $255.80, nearer the session low.
Fundamental analysis: Trading the past week in the live and feeder cattle futures markets has been choppy and sideways. Gains have been limited by ideas of upcoming seasonal pressure on the cash cattle markets, evidenced by the nearby live cattle futures’ discounts to the cash market. However, selling interest in futures has been limited by unseasonably strong cash market fundamentals.
Last week’s cash cattle trading average price was $190.90, up 93 cents and the highest level since early August. Today’s noon report showed wholesale boxed beef values rose, with Choice grade up $2.27 to $314.31, while Select grade gained $2.60 to $279.33 The Choice-Select spread remains seasonally wide at $34.98, suggesting continued tight supplies of quality animals in feedlots. Movement at midday was light at 44 loads.
Technical analysis: The cattle futures bulls 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 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 $187.875 and then at $189.00. First support is seen at today’s low of $185.90 and then at $185.00.
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 $250.00. First resistance is seen at today’s high of $257.65 and then at $259.00. First support is seen at last week’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.