Hogs
Price action: April lean hog futures climbed $1.675 to $89.875, while nearby February futures rose 75 cents to $83.05.
Fundamental analysis: Lean hog futures surged higher today, driven by strength in the cash markets. The CME lean hog index actually fell a penny to $81.92 as of Jan. 23. That brought some profit-taking Friday as traders were concerned over a potential downtick in the cash market. The preliminary calculation puts the index up two cents to $81.94 tomorrow. Diminishing weekly slaughter totals are expected to support cash hog prices in the near term as lower production meets robust demand. Strength in pork cutout underpinned futures today on anticipation of higher cutout prices leading the cash hog market higher, as was the case in December. Cutout rose $1.64 to $93.33 at midsession, led by strength in butts and loins. Traders clearly expect the cash market to pick up in the coming days and weeks as the February contract continues to build premium over the cash index.
Technical analysis: April lean hog futures surged higher today, though bears still maintain the technical advantage. Prices are nearing the upper end of the recent range as bulls are seeking to overcome resistance at $90.50. Above that mark, bulls are targeting $91.375 resistance. Meanwhile, support comes in at $88.30, the 40-day moving average, with support at $88.00 coming in below that 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 80 cents to $203.825, near mid-range and hit a new contract high early on. Nearby February live cattle futures set a record intraday high today of $208.15. March feeder cattle fell $1.325 to $275.25, nearer the session low and hit a contract high early on. Nearby January feeder cattle hit a record intraday high today of $280.55.
Fundamental analysis: A keener “risk-off” trading day in the marketplace took some of the wind out of the cattle futures markets bulls. The U.S. stock market saw a strong sell off, led by the tech sector. Profit taking from the shorter-term futures traders was also featured after live and feeder cattle futures have recently been hitting record highs.
Still, cash cattle and beef market fundamentals remain solid. Last week’s average cash cattle trading price was another record high, up $5.52 at $209.19, for the 10th consecutive week of higher prices. Packers are better situated on near-term slaughter needs but feedlots remain very current and they still have negotiating power. Still-higher average cash cattle trade this week cannot be ruled out.
Today’s noon report showed wholesale boxed beef values firmer, with Choice grade up 35 cents to $328.27, while Select grade rose $1.73 to $318.02. Movement at midday was decent at 86 loads.
Last Friday’s USDA cattle-on-feed report leaned bullish. USDA estimated there were 11.823 million head of cattle in large feedlots (1,000-plus head) as of Jan. 1, down 107,000 head (0.9%) from year-ago and 71,000 head less than analysts expected. The drop in feedlot supplies was due to a 3.3% decline in the number of cattle placed in December, which also came in below market expectations.
Technical analysis: Live and feeder cattle futures bulls still have the overall near-term technical advantage as prices are still in 2.5-month-old uptrends on the daily bar charts. The next upside price objective for the live cattle bulls is to close April futures above solid resistance at today’s contract high of $205.55. The next downside technical objective for the bears is closing prices below solid technical support at $196.50. First resistance is seen at $204.00 and then at $205.00. First support is seen at $202.00 and then at $201.00. The next upside price objective for the feeder bulls is to close March futures prices above technical resistance at $280.00. The next downside price objective for the bears is to close prices below solid technical support at $266.00. First resistance is seen at $277.00 and then at today’s contract high of $279.20. First support is seen at $274.00 and then at $273.00.
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 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.