Hogs
Advice: We advise livestock producers to extend corn-for-feed coverage another two weeks in the cash market through mid-December.
Price action: December lean hog futures rallied 97.5 cents to $80.525 and closed near session highs.
Fundamental analysis: Lean hog futures bounced today, closing in the upper end of the recent range. Strength in the cutout market likely supported futures today alongside technical buying, as December futures have struggled to break below last week’s lows. The CME lean hog index is down another 40 cents to $88.09 as of Nov. 18, the seventh decline in the last eight days. The preliminary calculation puts the index down another 26 cents to $87.83 tomorrow, a $7.30 premium to December futures. Traders are unlikely to allow the discount December futures hold to the index to get too wide, with recent cash market strength still fresh in their mind. It is still uncertain how much USDA underestimated fourth quarter hog supplies, which supported cash and futures alike over the past month.
With peak consumer pork demand likely behind us, falling cutout values have weighed heavily on cash prices, further extenuating the return of seasonal weakness in the index. Pork cutout did bounce $2.29 to $96.97 this morning, led higher by a $8.28 surge in bellies and $6.96 jump in picnics. Movement slowed to 137.23 loads. Belly values continue to face severe volatility due to smaller than expected supplies, though prices are well off their highs from a few weeks ago.
Technical analysis: December lean hog futures closed at the highest mark in a week today, though bears retain the near-term technical advantage. Initial resistance at the 10-day moving average at $80.60 capped gains today, further cementing bears’ advantage. Strength above that mark finds stiff resistance at $81.25. Resurgent selling pressure finds support at the psychological $80.00 mark then the recent low close of $79.50, which is quickly backed by downtrend support at $79.00.
What to do: Get current with feed coverage. Carry all production risk in the cash market for now.
Hedgers: You have 50% of fourth-quarter production hedged in December $84.00 put options at $2.075 and 50% of first-quarter production hedged in February $84.00 puts at $3.35.
Feed needs: NEW ADVICE -- Extend corn-for-feed coverage another two weeks in the cash market through mid-December. You have all of fourth quarter and 25% of first quarter 2025 soymeal needs in the cash market.
Cattle
Advice: We advise livestock producers to extend corn-for-feed coverage another two weeks in the cash market through mid-December.
Price action: Cattle and feeder futures traded mixed Wednesday. Nearby December live cattle futures slipped 27.5 cents to $186.30 at the close. Expiring November feeder futures, which go off the board at noon tomorrow, rose 55 cents to $254.80, while most-active January gained 32.5 cents to $252.325.
Fundamental analysis: There was a dearth of fed cattle trading Monday and Tuesday, with the only activity being the sale of a few lots of steers and heifers on a dressed-delivered basis. But Tuesday’s huge futures gains strongly hint that the cash market will stabilize and possibly rebound later this week. Packers will obviously operate on a shortened schedule next week, which might be construed to mean they won’t be pursuing cattle very aggressively in the days ahead.
One remarkable development this week has been the soaring spread between choice and select-grade beef prices. Choice cutout has stabilized between $303 and $309 lately, whereas Select cutout has fallen from around $278 a week ago to $270.92 at noon today. That pushed the Choice/Select spread to $37.39 at midsession. That essentially matches the all-time high for that figure, reached in June 2021. We harbor some concerns about hugely fat steers and heifers coming out of feedlots not grading choice, but we’re more inclined to view the spread as a reflection of a sustained shortage of high-quality beef. It seems quite price supportive.
Meanwhile, strong cash trading early this week has spurred a rise in the CME feeder index. It had dipped to $249.02 last Tuesday, but is now quoted at $253.68. With the November contract expiring tomorrow, it was forced higher (since it’s cash-settled). The deferred contracts have tagged along.
Technical analysis: Bulls seem to own the short-term technical advantage in December live cattle futures in the wake of Tuesday’s big surge. The 40-day moving average near $186.25 is now acting as initial support, with close backing from today’s low at $186.025. Look for additional support at the contract’s 20- and 10-day moving averages near $185.70 and $184.46, respectively. Today’s high marked initial resistance at $186.925, with a push above that point likely facing added resistance at the Oct. 30 high of $187.925, then at the psychological $190.00 level.
Feeder market bulls clearly have the short-term technical advantage in January feeder futures. Initial resistance stands at today’s high of $252.70, with a push above that level likely having bulls targeting the psychological $255.00 level, then $260.00. Recent gains have flipped the psychological $250.00 level to initial support. Below that point, look for support at the Oct. 14 high of $248.525.
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 corn-for-feed coverage another two weeks in the cash market through mid-December. You have all of fourth quarter and 25% of first quarter 2025 soymeal needs in the cash market.