Hogs
Price action: April lean hogs closed up $1.025 to $90.90 and nearer the daily high.
Fundamental analysis: The lean hog futures market is seeing buying interest coming from improving cash and fresh pork market fundamentals. The latest CME lean hog index is up 2 cents to $81.94 as of Jan. 24. Wednesday’s cash index is projected up another 17 cents at $82.11. While the cash hog index continues to rise from its seasonal low, gains have been modest compared to recent better gains in nearby futures, suggesting traders are optimistic for still more upside in the cash market in the near term. The February hog futures contract today closed at a $1.96 premium to the cash index. The noon report today showed pork cutout value up 49 cents to $93.65, the highest since late December and led by gains in hams and bellies. Movement at midday was good at 205.05 loads. Wholesale pork prices have been strong enough to keep pork packer margins in the black, which is supporting the cash market’s move up from a seasonal low.
Technical analysis: Lean hog futures bulls have the overall near-term technical advantage after three sessions in a row of good gains. 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 last week’s low of $86.00. First resistance is seen at the January high of $91.375 and then at $93.00. First support is seen at today’s week’s low of $89.875 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: 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 surged $3.45 higher to $207.275 and settled near today’s highs. March feeder cattle futures settled $3.00 higher at $278.25.
Fundamental analysis: Cattle futures continue to surge higher, marking fresh record highs for the fifth consecutive session. Anecdotal reports of cash cattle trade set the tone for higher cash cattle trade this week with futures seemingly leaning that way today as well, with February futures trading just below last week’s record cash average. The cattle market shows little signs of slowing down and likely will not until the market tops. Historically, when commodity prices rocket higher as they have in cattle, the fall comes just as, if not more aggressively. Still, cash fundamentals remain supportive and there are little signs a market top is either in place or near at hand. USDA reported cash cattle trade on Monday at $203.00 in Kansas. That topped last week’s average for the area despite being lower quality animals, a sign of persistent strength, though only 208 head traded hands. Wholesale beef prices showed modest strength at midsession, rising $2.46 to $332.54 in Choice, while Select climbed $2.36 to $322.91. Wholesale prices remain largely stagnant despite the rally in cattle, pushing packer margins deeper into the red. That has done little to slow packer purchases in recent weeks as feedlots maintain negotiating power.
Technical analysis: April live cattle futures surged to a fresh contract high today as bulls continue to maintain full control of the technical advantage. The market is heavily overbought which could spur some profit-taking, but given the strength in the cash market, an extended downward move is not likely at this point. Bulls are targeting today’s contract high of $207.725 before tackling additional resistance at $209.15. Support comes in at $205.55 then $205.00, while additional selling eyes support at $202.50.
March feeder cattle futures made up all of Monday’s losses and then some. Bulls continue to retain the technical advantage and are looking to challenge yesterday’s contract high of $279.20, while additional resistance stands at $280.00. Support comes in at $275.00 then the 10-day moving average at $272.70 on profit-taking, which is possible given the overbought nature of the market.
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.