Hogs
Advice: We advise livestock producers to extend soymeal coverage another three weeks in the cash market through mid-February.
Price action: February lean hogs fell 47 1/2 cents to $79.175, nearer the session low and hit a three-month low.
Fundamental analysis: Technical selling was featured today amid a deteriorating chart posture for February lean hog futures. Eroding cash hog market fundamentals are also prompting selling pressure in futures. The latest CME lean hog index is down another $1.11 to $82.01 as of Jan. 3--the sixth straight daily drop and the largest daily decline since August. Wednesday’s projected cash hog index price is down 42 cents at $81.59. The national direct five-day rolling average cash hog price quote today is $79.56. The noon report today showed pork cutout up $1.40 to $89.23, on gains in hams and bellies. Movement at midday was good at 253.22 loads.
February hog futures continue to trade well below the cash index, suggesting traders anticipate extended cash hog market weakness. The hog market has in January historically rebounded from year-end holiday lows but has also seen surprisingly sustained weakness in some recent years. Bulls are hoping the seasonal downtrend in hog supplies that lasts into early summer and stronger consumer demand for pork will produce a cash rebound into mid-to-late February.
Technical analysis: February lean hog prices are in a five-week-old downtrend on the daily chart. Bears have the near-term technical advantage. The next upside price objective for the hog bulls is to close February prices above solid chart resistance at $83.00. The next downside price objective for the bears is closing prices below solid technical support at $75.00. First resistance is seen at today’s high of $80.175 and then at this week’s high of $81.125. First support is seen at today’s low of $78.825 and then at $78.00.
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: NEW ADVICE -- Extend soymeal coverage another three weeks in the cash market through mid-February. You are hand-to-mouth on corn-for-feed needs.
Cattle
Advice: We advise livestock producers to extend soymeal coverage another three weeks in the cash market through mid-February.
Price action: February live cattle futures rallied 50 cents to $195.575 though closed well off session highs. January feeder cattle futures surged $2.10 to $268.40.
Fundamental analysis: Cattle futures worked to a fresh high as cash fundamentals continue to drive the market higher. Futures continue to trade under the cash market as traders wonder just how high the cash market can go, but cash trade continues to beat expectations. Negotiations got an early start this week with 400 head trading hands in Iowa/Minnesota at an even $200. Cattle weights continue to be impressive and are near record highs, which is also price supportive. Wholesale beef prices have been working higher as well, which has partially offset higher cattle prices. Packers continue to actively manage negative cutting margins, which were most recently estimated at -$20/head, according to Hedgersedge. Choice cutout climbed $2.56 to $329.66 while Select rose 74 cents to $304.07 at midsession. Not only have wholesale beef prices proven impressive for this time of year, movement remains quite strong as well, totaling over 140 loads the past two days. Movement at midsession totaled 71 loads, continuing that trend.
Cash feeder cattle prices proved disappointing at the end of 2024, dragging the feeder cattle index from $263.05 to $253.97 in just a couple days. Since then, the index has surged to a new record high, most recently quoted at $265.70, up $4.71 from the previous day. Continued delays in feeder cattle imports from Mexico due to the new world screwworm continues to support both feeders and fats. Traders will keep a close eye on the market once imports resume, as the market is likely looking for an opportunity to reverse as futures for both fats and feeders are both technically overbought.
Technical analysis: February live cattle futures extended to a fresh for-the-move high before closing near mid-range. Bulls continue to maintain the technical advantage. Initial resistance stems from $196.625 with tentative resistance above that mark at $196.95, then $197.50. Bulls are ultimately targeting the all-time high of $199.575. Support stems from $195.20 then $193.70 on a reversal lower.
January feeder cattle futures climbed to a fresh for-the-move high today as bulls continue to maintain the technical advantage. Initial resistance stems from today’s high of $269.35 with additional resistance coming in at the contract high of $272.425. Support comes in at $267.875 then the 10-day moving average at $263.35.
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 three weeks in the cash market through mid-February. You are hand-to-mouth on corn-for-feed needs.