Hogs
Price action: April lean hog futures fell 52.5 cents to $91.625 and settled near mid-range, while nearby February futures climbed 45 cents to $87.70.
Fundamental outlook: Lean hog futures saw action on either side of unchanged before closing mixed on the day. April futures continue to face persistent technical resistance above the $92.00 mark, which has capped gains the past three sessions. Cash fundamentals remain quite supportive, which continue to limit the downside, but until April futures can close above $92.50, additional consolidation seems likely. The CME lean hog index is up another 34 cents to $85.39 as of Feb. 6. The preliminary calculation puts the index up another 36 cents to $85.75, extending the seasonal uptrend. February futures go off the board Friday at noon and will cash settle against the index quote for that date. February futures hold a $1.95 premium to the index as of today’s close, indicating traders continue to anticipate cash market strength. The wholesale pork market supports that claim as cutout continues to work higher. Pork cutout was up another $3.86 to $100.86 this morning after marking a fresh for-the-move high on Friday. Hams led strength at midsession, with bellies, ribs, loins and picnics seeing impressive strength as well.
Technical outlook: April lean hog futures traded on either side of unchanged before closing modestly lower. Bulls are looking to overcome stiff resistance at $92.50, which is reinforced by the Dec. 3 contract high at $93.60. Continued consolidation has bulls looking to hold prices above support at $91.375, which is reinforced by the 10-day moving average at $90.60, then the psychological $90.00 mark.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
Feed needs: You should have all soymeal needs covered in the cash market through the end of February. You are hand-to-mouth on corn-for-feed needs.
Cattle
Price action: April live cattle rose $1.35 to $198.125, nearer the session high. March feeder cattle gained $3.225 to $268.125, nearer the session high.
Fundamental analysis: The cattle futures markets today saw perceived bargain buying and short covering following recent losses. Cash cattle and beef market fundamentals remain overall sound, but have deteriorated a bit recently. Cash cattle prices fell from the prior week’s record average and scored the first down week in 12 weeks. Last week’s cash cattle trading average was down $2.52 at $207.05. We look for weaker cash cattle trade again later this week.
The discount that live cattle futures hold to the cash market has become wide, which could support more upside price action in futures in the near term.
Today’s noon report showed wholesale boxed beef cutout values higher, with Choice-grade up $2.21 to $324.08, while Select grade gained 78 cents to $313.68. The Choice-Select spread is presently $10.40. Movement at midday was 42 loads.
World Weather Inc. today said snow and cold in the Plains states in the coming days will stress livestock, especially in the southwest where it had been so warm and now it will be much cooler.
Technical analysis: Live and feeder cattle futures markets have suffered near-term chart damage recently to suggest market tops are in place. Prices are starting to trend down on the daily bar chart. The next upside price objective for the live cattle bulls is to close April futures above solid resistance at last week’s high of $203.275. The next downside technical objective for the bears is closing prices below solid technical support at $192.50. First resistance is seen at today’s high of $198.70 and then at $200.00. First support is seen at last week’s low of $195.85 and then at $195.00.
The next upside price objective for the feeder bulls is to close March futures prices above technical resistance at $275.00. The next downside price objective for the bears is to close prices below solid technical support at $260.00. First resistance is seen at $270.00 and then at $271.50. First support is seen at $266.00 and then at last week’s low of $264.075.
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 should have all soymeal needs covered in the cash market through the end of February. You are hand-to-mouth on corn-for-feed needs.