Hogs
Price action: April lean hogs closed up $3.40 to $89.75, near the daily high.
Fundamental analysis: April lean hog futures prices regained most of Monday’s limit-down losses that came in the wake of new U.S. tariff threats against its major trading partners. On this day, hog traders took a better view that the U.S. and its trading partners, especially Mexico, can come to an amicable agreement following the U.S. granting a one-month extension to Mexico and Canada for the new U.S. trade tariffs going into effect.
The latest CME lean hog index is up another 29 cents to $83.77 as of Feb. 3. The index has risen $3.34 from the seasonal low on Jan. 9. Wednesday’s cash hog quote is projected 31 cents higher at $84.08. The national direct five-day rolling average cash hog price quote today is $83.92. The noon report today showed pork cutout value rose 78 cents to $94.59, led by all cuts but bellies. Movement at midday was good at 175.54 loads.
Technical analysis: Lean hog futures bulls have the overall near-term technical advantage after today’s solid rebound. 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 January low of $84.50. First resistance is seen at $90.00 and then at $91.00. First support is seen at $88.00 and then at this week’s low of $86.35.
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 futures sunk $1.50 to $198.65 and closed nearer session lows. March feeder cattle futures plunged $2.25 to $268.25, nearer session lows.
Fundamental analysis: Cattle futures continue to undergo heavy, persistent selling pressure. As we had reported previously, markets that explode higher, like what happened in the latter half of January in April live cattle futures, tend to see similar volatility on the way down. There is not always an obvious catalyst for a reversal, but once momentum shifts it is difficult to stop. That has certainly been true in cattle futures over the past week as prices continue to face selling pressure despite persistent strength in the cash cattle market. Light cash cattle trade took place in Iowa-Minnesota on Monday at $209.00. While that is down about $1.50 for last week’s average for the area, futures have fallen well more than that in the past five sessions. Wholesale beef prices continue to work higher as well, as Choice cutout climbed $1.74 to $333.73 at midsession. That is near the mid-January peak. Select cutout rose 91 cents to $320.75 this morning. While wholesale prices have lagged behind strength in cattle prices, recent strength in cutout is at least somewhat encouraging to bulls as it helps shore up packer margins, which remain in the red.
Feeder futures continue to sustain heavy selling pressure as well amid woes that the U.S. will resume cattle imports from Mexico in the near future. That quickly took the wind out of bull’s sails and created a wide disparity between the feeder cattle index, which was most recently quoted $1.62 higher to $281.07, and nearby futures. The extended timeframe between now and the March contract’s expiration likely plays a role in the wide spread, but traders will undoubtedly keep a close eye on the index, particularly when imports do resume.
Technical analysis: April live cattle futures are challenging uptrend support, risking the bulls technical advantage. Support lies at $197.50 on continued selling, while the 40-day moving average coming in at $197.05 below that mark. The 20-day moving average now stands as initial resistance at $198.65, which is reinforced by psychological resistance at $200.00.
March feeder cattle futures continue to face staunch selling pressure. Bulls maintain a slight advantage, but a move much lower shifts the advantage to the bears. Support stands at $268.00 then the 40-day moving average at $265.50. Resistance comes in at the psychological $270.00 mark then $272.20, the 10-day moving average, on a reversal higher.
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.