Hogs
Advice: We advise livestock producers to extend soymeal coverage another month in the cash market through March.
Price action: April lean hogs rose $1.35 to $92.975, near the daily high and closed at a contract high close.
Fundamental analysis: The lean hog futures saw chart-based buying from the speculators featured today, amid improved cash hog market fundamentals. The latest CME lean hog index is up another 36 cents to $85.75 as of Feb. 7, extending the seasonal rise. Wednesday’s projected cash index price is up another 44 cents at $86.19. The national direct five-day rolling average cash hog price quote today is $85.91.
While the expiring February lean hog futures contract has been supported by strength in the cash market, deferred futures have lagged recently. Traders look for more strength in the cash hog market in the near term, as February futures today closed almost $3.00 above the latest cash hog index quote.
The noon report today showed pork cutout value backed off a bit from recent good gains, down 69 cents to $98.93, led by losses in bellies. Surging wholesale values had kept packer margins in the black despite rising cash hog prices. Movement at midday was solid at 215.36 loads.
Technical analysis: Lean hog futures bulls have the firm overall near-term technical advantage. The next upside price objective for the hog bulls is to close April prices above solid chart resistance at the contract high of $93.60. The next downside price objective for the bears is closing prices below solid technical support at the February low of $86.35. First resistance is seen at this week’s high of $93.05 and then at $93.60. First support is seen at this week’s low of $90.725 and then at $89.00.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
Feed needs: NEW ADVICE -- Extend soymeal coverage another month in the cash market through March. You are hand-to-mouth on corn-for-feed needs.
Cattle
Advice: We advise livestock producers to extend soymeal coverage another month in the cash market through March.
Price action: April live cattle futures slid $2.125 to $196.00 and settled nearer session lows, while nearby February futures sunk $2.125 to $199.675. March feeder cattle futures plunged $3.35 to $264.775.
Fundamental outlook: Cattle futures traded sharply lower as technical selling pressure continues to weigh heavily on the market. Prices are in a steep downtrend following the late January record high, driven largely by long liquidation from managed money. Cash cattle prices continue to trend lower as well. Trade took place in Kansas early this week at $204.00, which is down about $2.00 from last week’s average for the area. While movement was light and included some lower quality animals, it set the tone for another week of lower cash cattle trade as packers continue to manage poor margins by limiting slaughter runs. Despite packers curtailing production, wholesale beef prices continue to inch lower. Choice cutout fell 88 cents to $322.62 Monday while Select sunk $1.62 to $312.30.
Feeder cattle futures continue to undergo heavy selling pressure as well. Weakness in corn following today’s reports did little to curtail selling pressure in feeders. Anticipation of feeder cattle imports from Mexico resuming soon continues to weigh heavily on the market. Still, the cash feeder market, as noted by the feeder cattle index (which is most recently up 17 cents to $275.76), has remained within a few dollars of recent record highs. Both fats and feeders have diverged from cash fundamentals recently, which could prove supportive of futures in the near future.
Technical outlook: Selling today confirmed bears’ modest technical advantage in April live cattle futures. Continued selling pressure has bears targeting initial support at $195.00, which sees little backing until support at $193.00. Strength has bulls targeting initial resistance at $197.20 before tackling downtrend resistance at $198.20, which is reinforced by the 10-day moving average at $198.80.
March feeder cattle futures held up a little better than fats today, though bears retain a slight technical advantage. The 40-day moving average has limited most of the downside and currently stands as an important pivot at $265.80. Strength above that mark targets resistance at $268.50. Continued selling pressure eyes support at $263.15 then $260.70.
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: NEW ADVICE -- Extend soymeal coverage another month in the cash market through March. You are hand-to-mouth on corn-for-feed needs.