Hogs
Price action: Hog futures stabilized Thursday in the wake of recent losses, but the nearby February contract lost another 15 cents to settle at $81.15.
Fundamental analysis: Ongoing ham weakness continued weighing on the hog and pork complex Thursday, but the modest early-morning decline in ham values was offset by strength in the other cuts. Primal ham values have dived about $12.00 from last week’s late quotes to $95.69 at midsession today, marking a belated drop that has traditionally occurred in mid-December. This morning’s moderate drop of $1.37 suggested the breakdown may soon end. Moreover, strong gains by loins and picnics dwarfed the ham drop and pulled the midday quote for pork cutout up $2.17 to $92.47.
Meanwhile, cash hog prices remained under pressure. The CME confirmed Monday’s official quote for the CME index at $84.27, down eight cents from last Friday. The latest USDA data indicates the index will slip another 28 cents to $83.99 when Tuesday’s quote is published tomorrow. The midsession bounce in wholesale values, as well as the discount now built into February futures and trader knowledge of the cash market’s historical tendency to rise moderately early in the year, probably limited today’s futures weakness (at least temporarily). Futures still look technically vulnerable, but fundamental considerations could limit the market’s short-term downside potential.
Technical analysis: Bears still own the short-term technical advantage in February lean hog futures. Tentative initial support still stands at Monday’s low of $80.90, but bears have again failed to force a drop below robust psychological support at the $80.00 level (from which the market bounced Tuesday and again today). A drop below that point would open the door to a retest of mid-October lows around $79.30, then late-September lows near $76.85. Today’s high marked initial resistance at $81.825 and that’s backed by 10-, 20- and 40-day moving average resistance at $83.44, $84.34 and $84.92, respectively.
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 $2.00 to $193.60, nearer the session high and hit a nine-month high. March feeder cattle rose $3.225 to $266.20, nearer the session high and hit a contract high.
Fundamental analysis: Bullish cash market fundamentals rallied the cattle futures markets today. Bullish charts also prompted technical buying from speculators in both live and feeder cattle futures. The discount cattle futures hold to the cash market also sparked buying in futures.
Cash cattle trading so far this week is coming in $2.00 to $3.00 higher, at around $197.00 in a light test. Due to negative cutting margins, packers aren’t expected to buy a lot of cattle this week. However, some cash sources said packers are short-bought and may get aggressive with bids. The noon report today showed weaker boxed beef values, with Choice grade down $1.67 at $322.55 and select dipping 23 cents to $294.29. Movement was 53 loads. The Choice-Select spread is currently $28.26.
A major winter storm hitting parts of the Plains states late this week may stress livestock in the region. World Weather Inc. today said the significant cold weather will impact the region through Tuesday, causing livestock stress.
Technical analysis: Cattle futures bulls have the solid near-term technical advantage. Prices are in six-week-old uptrends on the daily bar charts. The next upside price objective for the live cattle bulls is to close February futures above solid resistance at the March 2024 high of $194.85. The next downside technical objective for the bears is closing prices below solid technical support at $188.00. First resistance is seen at today’s high of $193.95 and then at $194.85. First support is seen at today’s low of $191.525 and then at this week’s low of $190.125. The next upside price objective for the feeder bulls is to close March futures prices above technical resistance at $270.00. The next downside price objective for the bears is to close prices below solid technical support at $258.00. First resistance is seen at today’s contract high of $266.95 and then at $268.00. First support is seen at $264.00 and then at today’s low of $263.00.
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.