Hogs
Advice: We advise livestock producers to cover remaining fourth quarter soymeal needs and 25% of first quarter 2025 needs in the cash market.
Price action: December lean hog futures surged $1.55 to $84.375, marking a fresh contract high and ending the day near session highs.
Fundamental analysis: Lean hog futures continue to surge higher as contra-seasonal strength in the cash market persists. At this point, it is clear USDA overestimated hog supplies in their September Hogs & Pigs Report. USDA anticipated a bump in hog supplies to end the year, while slaughter has undercut year ago about half of the weeks since that report was released at the end of September. What is still to be seen, is how far USDA was off in their estimate. Traders are clearly optimistic, with their buying powering December futures over $5.00 higher in the past four trading sessions. Futures are well overbought, which could lead to profit-taking in the near future, but bulls continue to own a distinct advantage. The CME lean hog index is up another 18 cents to $85.73 as of Oct. 28, the eighth straight daily gain. The preliminary calculation puts the index up another $1.05 to $86.78 tomorrow, which would be the highest quote since Aug. 28 and the biggest increase since April 10. Tight belly stocks continue to support wholesale pork as well, as pork cutout is up another $1.23 to $102.30, led higher by a $7.02 jump in bellies.
Technical analysis: December lean hog futures continue to surge higher as bulls still own the near-term technical advantage. Gains fell shy of psychological $85.00 resistance today, marking that as bulls’ target. Prices are overbought on the daily bar chart, leaving room for profit-taking in the near future. Support stems from $83.00, the prior contract high of $80.65 then the 10-day moving average at $80.35 on a reversal lower.
What to do: Get current with feed coverage. Carry all production risk in the cash market for now.
Hedgers: Carry all risk in the cash market for now.
Feed needs: NEW ADVICE -- Cover remaining fourth quarter soymeal needs and 25% of first quarter 2025 needs in the cash market. You should also have all corn-for-feed needs covered in the cash market through November.
Cattle
Advice: We advise livestock producers to cover remaining fourth quarter soymeal needs and 25% of first quarter 2025 needs in the cash market.
Price action: Cattle futures continued Tuesday’s breakdown. The expiring October contract fell 90 cents to $188.40, while most-active December dove $1.525 to $186.425. In contrast, the nearby October feeder contract rallied 92.5 cents to $250.95, but deferred feeders also declined. November feeder futures dropped $1.10 to $245.50.
Fundamental analysis: Traders likely believe the September-October rally in fed cattle values is coming to an end, which, along with widespread long-liquidation, played a role in today’s followthrough futures decline. Bulls proved able to limit the losses around midsession, but bears renewed the downward pressure as the close loomed. The fact that active trading occurred in Iowa Tuesday, with the bulk of the activity taking place around $189.22, down about $1.00 from last week’s five-area average, is probably the main reason for the futures drop. Bears are also being encouraged by this week’s wholesale slippage. For example, after choice cutout fell $2.89 to $320.61 Tuesday, it slid another $1.09 to $319.52 at midsession today.
Thus, a short-term decline in cash cattle and beef values seems rather likely at this point. The big question is how far and how long such a drop might last. We doubt we will see a repeat of the fourth-quarter 2023 breakdown. The main reason for doubting such an eventuality is the demand strength seen this year. One could argue that the sizeable September rise in beef stocks signaled diminished consumer interest, but the situation feels much different than it did a year ago. We think fundamentals will continue supporting the outlook into spring.
Technical analysis: The Tuesday-Wednesday breakdown in December live cattle futures has weakened the bullish hold on the short-term technical situation, but the advantage still seems to point in their favor. Today’s low marks initial support at $185.475, but it’s strongly backed by psychological support at $185.00 and the 40-day moving average near $184.29. A close below the latter point would have bears targeting the psychological $180.00 level. Resistance at today’s high of $187.925 reinforces initial resistance between the 20- and 10-day moving averages at $187.54 and $187.85, respectively. A rebound back above that range would reopen the door to a test of the $190.00 level.
Today’s drop also weakened the bullish technical hold on the short-term November feeder futures. The slight gap lower made yesterday’s low of $246.20 initial resistance. That’s back by the 10- and 20-day moving averages near $247.45 and $248.07, respectively, with further backing from Tuesday’s high of $249.425 and the psychological $250.00 level. However, the big rebound from the daily low at $243.85 established solid support at that level. But bulls can probably count on initial support at mid-October lows around $245.00. Those are backed by the 40-day moving average near $243.60. The bears’ inability to challenge the latter confirms the strength of support in that area. A close below the 40-day moving average would have bears targeting the $240.00 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: NEW ADVICE -- Cover remaining fourth quarter soymeal needs and 25% of first quarter 2025 needs in the cash market. You should also have all corn-for-feed needs covered in the cash market through November.