Hogs
Price action: December lean hogs futures climbed 30 cents to $81.975 though closed mid-range.
Fundamental analysis: Lean hog futures were supported by surging pork cutout today. Steep discounts to the cash index likely spurred some strength today as well as December futures continue to trade at a hefty discount to the CME lean hog index. Still, recent accelerated losses in the index could encourage bears to increase positions here in the coming days. The index is down another 43 cents to $87.01 as of Nov. 21, while the preliminary calculation puts tomorrow’s quote down another 55 cents to $86.47, $4.495 above the December contract at today’s close. Surging cutout values supported futures today as well. Pork cutout was up $4.38 to $96.15 this morning, rebounding from Friday’s for-the-move low. Gains in picnics, which were up $12.45, hams, ribs and loins led cutout higher this morning. USDA will release their monthly Cold Storage Report this afternoon. The five-year average is a 16.8-million-lb. decline in pork stocks during the month of October.
Technical analysis: December lean hog futures have closed higher for four consecutive sessions, closing above downtrend resistance stemming from the early November high, rendering the near-term advantage to the bulls. Bulls next objective is closing prices above resistance at $82.35, which is reinforced by resistance at $83.425. Resurgent selling pressure finds support at the 10-day moving average at $81.05 then downtrend support at $80.25, which is quickly backed by the psychological $80.00 mark.
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: February live cattle fell 50 cents to $187.70, near the daily low after hitting a three-week high early on. January feeder cattle rose $1.175 to $255.475, nearer the session low and hit a 4.5-month high.
Fundamental analysis: The feeder cattle bulls extended their recent winning streak but the live cattle bulls faded to start the trading week. Today’s low-range closes in both markets suggest the bulls may now be exhausted after recent price gains.
However, cash cattle market fundamentals remain sound. Last week’s official average price for cash cattle trade was up $1.60 to $186.39, ending a three-week string of losses. The noon report today showed Choice-grade boxed beef prices rose $2.36 to $309.77, while Select-grade rose 77 cents to $272.84, widening the Choice/Select spread to $36.93. Movement at midday was 59 loads.
Last Friday’s monthly USDA cattle-on-feed report showed there were 11.986 million head of cattle in large feedlots (1,000-plus head) as of Nov. 1. That’s up 30,000 head (0.3%) from one year ago. Analysts on average had expected a 0.1% decline in feedlot inventories. October cattle placements on feed increased 5.3% and marketings rose 4.7% from year-ago levels.
Technical analysis: The live cattle futures bulls have the overall near-term technical advantage. The next upside price objective for the live cattle bulls is to close February futures above solid resistance at the May high of $192.00. The next downside technical objective for the bears is closing prices below solid technical support at the November low of $184.40. First resistance is seen at $189.00 and then at the October high of $190.325. First support is seen at $187.00 and then at $186.00.
The next upside price objective for the feeder bulls is to close January futures prices above technical resistance at the May high of $263.425. The next downside price objective for the bears is to close prices below solid technical support at $250.00. First resistance is seen at $$257.50 and then at today’s high of $259.525. First support is seen at today’s low of $254.90 and then at $254.00.
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.