Hogs
Price action: Traders are still awaiting developments in the hog market, with futures firming somewhat Thursday. Nearby December futures edged up 22.5 cents to $80.80.
Fundamental analysis: The CME lean hog index continues its seasonal slide. The exchange confirmed Tuesday’s quote at $87.83, down 26 cents from Monday, while today’s USDA data indicates it will land at $87.44 when Wednesday’s quote is officially released tomorrow. The industry clearly expects sustained cash losses over the next three weeks, as best indicated by the December future’s closing discount of $6.64 below the index. The contract expires on Friday, Dec. 13. The contract seems to hold relatively equal chances of expiring above or below that level, with the comparative strength seen this fall at least partially offsetting the market’s clear history of late-year cash weakness.
The wholesale market seems to favor bulls somewhat, since pork cutout remains well supported. As is often the case, cutout gave back a major portion of the big gains posted at noon Wednesday, but today’s midsession quote at $95.15, up 55 cents, highlights its stubborn resilience in that area. We think underlying fundamentals of surprisingly “low” hog supplies and robust consumer demand will tend to limit the market’s downside potential.
Technical analysis: Bulls seem to hold a slight advantage in the current short-term technical environment concerning December hog futures, especially after this week’s decided bounce from pivotal 40-day moving average support near $79.13. Initial support stands at the 10-day moving average near $80.69, which is backed by stout psychological support at $80.00. Today’s high of $81.55 confirmed the strength of initial resistance around the 20-day moving average near $81.55. A breakout above that area would open the door to a test of recent highs at $82.35 and $83.425.
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: You have all soymeal needs in the cash market through the third week of January. You should also have all corn-for-feed needs covered in the cash market through mid-December.
Cattle
Price action: December live cattle fell 70 cents to $185.60, near the daily low. January feeder cattle rose $1.125 to $253.45, nearer the session high and hit a 3.5-month high. November feeder futures went off the board at $255.125.
Fundamental analysis: Live cattle futures saw another corrective pullback after solid gains seen Monday and Tuesday. Feeder cattle futures continued to push higher on bullish technicals.
Cash cattle trade has been limited this week on mixed ideas on the eventual outcome of this week’s trading. There was light trading in Nebraska and Iowa Wednesday. The bulk of steer trading was in Iowa, averaging $184.67, with Nebraska trading at $185.00. That pulled the 5-area average up to $184.71. A few heifers traded at $186.18 in Iowa and $187.00 in Nebraska. A few mixed lots also traded, averaging $184.96 in Iowa and $188.00 in Nebraska. Steers imply steady trade this week, but the higher heifer and mixed lots suggest firmer cash activity. Unless packers unexpectedly raise cash cattle bids, it’s likely most of this week’s cash trade may not take place until Friday afternoon, which is common during weeks the monthly USDA Cattle on Feed report is out. Friday’s COF report is expected to show on-feed numbers as of Nov. 1 about the same as seen Nov. 1 last year, but marketings and placements are expected to be up from a year ago.
The noon report today saw boxed beef values firmer, with Choice grade up 26 cents at $306.65, while Select grade gained $2.56 to $273.55. Beef packer margins are well into the red this week. Movement at midday was 63 loads. The Choice-Select spread today narrowed to $33.10.
USDA this morning reported U.S. beef export sales of 14,300 MT for 2024, up modestly from a week ago.
Technical analysis: The live and feeder cattle futures bulls have the overall near-term technical advantage. The next upside price objective for the live cattle bulls is to close December futures above solid resistance at the July high of $190.075. The next downside technical objective for the bears is closing prices below solid technical support at the November low of $182.60. First resistance is seen at this week’s high of $186.925 and then at $190.00. First support is seen at $185.00 and then at $184.00.
The next upside price objective for the feeder bulls is to close January futures prices above technical resistance at $257.50. The next downside price objective for the bears is to close prices below solid technical support at $247.50. First resistance is seen at today’s high of $$253.95 and then at $255.00. First support is seen at Wednesday’s low of $251.525 and then at $250.00.
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 soymeal needs in the cash market through the third week of January. You should also have all corn-for-feed needs covered in the cash market through mid-December.