Hogs
Price action: December lean hog futures surged $1.00 higher to $82.125 and settled near session highs.
Fundamental analysis: Hog futures rebounded today as persistent contra-seasonal has traders wary of extending discounts already built into nearby futures. The strength exhibited in the cash markets have continued to prove stronger than traders expected as the market continues to try to shake out just how much smaller fourth quarter pork production is going to be than previously anticipated. The CME lean hog index is up another 41 cents to $89.79 as of Nov. 4, the 13th consecutive daily gain. The preliminary calculation puts Tuesday’s preliminary index calculation up another 45 cents to $90.24. That strength likely spurred corrective buying in futures today. Traders still anticipate the return of seasonal weakness, but persistent gains in the index have amplified questions as to when the index will finally turn lower. It is worth noting that head counts in the negotiated market have dropped to low levels the past two days; cash hog prices have continued higher but movement has been lower. Traders and analysts alike will keep a close eye on the negotiated market in the next couple of days. After falling on Tuesday, wholesale pork prices once again turned higher this morning. Pork cutout was up $1.75 to $103.18 at midsession, led by a $9.80 jump in bellies. A shortage of bellies has belly prices showing strong strength, helping keep cutout at elevated levels.
Technical analysis: December lean hog futures posted strong corrective gains following staunch selling the past couple of days. Strength today negated ideas of a potential island top reversal. Bulls continue to retain the technical advantage. Resistance stems from $82.85 then the for-the-move high close of $84.375. Initial support stems from the 10-day moving average at $81.80, while additional selling pressure finds support at yesterday’s low of $81.075 then 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 of fourth quarter and 25% of first quarter 2025 soymeal needs in the cash market. You should also have all corn-for-feed needs covered in the cash market through November.
Cattle
Price action: Cattle and feeder futures rebounded from recent losses Wednesday, with nearby December live cattle rising 62.5 cents to $185.40 at the close. Expiring November feeder futures jumped $1.55 to $247.70, while most-active January feeders ran up $1.675 to $244.025.
Fundamental analysis: The cattle and feeder markets remain quite high by historical standards but are showing signs of short-term weakness. For example, last week’s five-area cash market average came in at $189.82, down 23 cents from the week prior. There has been minimal trading so far this week. What has occurred took place in Kansas Monday. A lot of 257 steers traded at $189.00, down about $1.00 from last week, but another lot of 89 animals changed hands for $184.00. Those were likely lesser-quality animals. The USDA reported no cash trading of fed cattle yesterday.
Meanwhile, the recent slide in beef cutout values continues. Choice cutout slipped another 36 cents to $316.85 this morning, while select cutout fell $1.49 to $283.75. These quotes are down about $8.00 from last week’s highs. We suspect a portion of the drop is seasonal in nature due to the looming Thanksgiving holiday. Moreover, unlike the last few years, when Thanksgiving came very early, it arrives as late as possible, on November 28, this year. This means it’s essentially the same weekend as the first one in December, which will limit the amount of beef likely to be featured by grocers early next month.
On the other hand, the supply of high-quality steers and heifers remains very tight, as indicated by the $33.10 disparity between Choice- and Select-grade beef prices indicated at noon. This is unlikely to change anytime soon. As long as grocers don’t aggressively raise retail beef prices, especially those for steaks, strong consumer demand should continue supporting the cattle and beef complex through next spring.
The feeder index slipped 27 cents to $250.73 Monday. We suspect the disparity between the cash equivalent price and nearby futures at today’s opening sparked fresh futures gains. That’s particularly true of the November contract, which will expire early (November 21) this month. That strength in the face of today’s impressive corn strength seemingly bodes well for the short-term yearling outlook.
Technical analysis: The technical advantage in December live cattle futures seems balanced on a knife’s edge. That is, bulls have recently proven able to prevent the recent setback to the area surrounding its 40-day moving average near $185.43. Conversely, bears have proven unable to force a decisive drop below that figure since triggering last Friday’s test of that level (along with tests of that level each day this week. A close significantly below that figure, as well as support stemming from the July 19 low of $184.35, would likely trigger a big followthrough to the downside, with bears targeting the $182.00 level, then $180.00. Today’s high marked initial resistance at $186.60. That’s back by the confluence of its 10- and 20-day moving averages between $186.95 and $187.14, respectively.
Bulls seem to hold a modest technical advantage in January feeder futures. Bears have proven unable to seriously challenge 40-day moving average support, now near $241.50 this week. Conversely, a decisive drop below that point would have them targeting the $240.00 level, then $230.00 in short order. Expect initial resistance near the contract’s 20-day moving average near $244.48, with close backing from today’s high at $245.55. A bullish breakout would open the door to a test of the Oct. 29 high of $247.30, then the Oct. 14 high of $248.525 and eventually the psychologically important $250.00 level.
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 of fourth quarter and 25% of first quarter 2025 soymeal needs in the cash market. You should also have all corn-for-feed needs covered in the cash market through November.