Cattle futures got hit hard again on Wednesday, more downside to come? Lean hogs climbed to new highs yet again. Where’s the top?
Lean hogs continued to make new highs in yesterday’s trade, but has the market gone too far too fast?
Live Cattle (December)
December live cattle futures broke lower yesterday which took prices down near 4-star support which we outlined from the start of the week as 184.55-185.20. So far the Bulls have been able to defend that which has limited the technical damage, but a failure to hold here could turn the tide and trigger additional long liquidation from funds. This is something we’ve hit on quite a few times over the last week as Funds have grown their largest net long position since last October (when the market first rolled over). Not to say that it will happen again, but the risk is there coupled with potential headline risks from the outside markets.
Resistance: 189.47-190.075, 191.47-191.62
Pivot: 187.675-188.00
Support: 184.55-185.20, 182.82-183.325
Daily Cattle and Beef Summary
Cutout values were softer on Wednesday afternoon with choice cuts 1.17 lower to 319.44 and select cuts -.64 lower to 289.32. The 5-area average price for live steers was reported at 189.36, slightly steady with the start of the week.. Wednesday’s slaughter was reported at 124 k head, in line with the same day last week but 1k more than the same day last year.
Weekly Export Sales
Net sales of 13,900 MT for 2024 were down 17 percent from the previous week and from the prior 4-week average.
Bird Flu Update – Bloomberg
Dairy farmers in California are grappling with a steadily advancing outbreak of avian flu in their herds – a problem few of them want to talk about publicly, but that none of them can afford to ignore. Bird flu has been reported in more than 170 herds in California since late August, with the state accounting for nearly half of all US cases detected in dairy cows since the outbreak began in March.
Seasonal Tendency Update
Below is a look at historical price averages for February futures on a 5, 10, 15, 20, and 30 year time frames (Past performance is not necessarily indicative of future results). The chart appears to show that the first half of November is a tough time for the market to stage a meaningful rally. Whether or not that rings true this year is TBD. As mentioned for the last week, volatility is still relatively low which may make options an appealing tool to help manage risk or express an opinion in the market with limited risk.
Lean Hogs (February)
We put out a video yesterday afternoon outlining the setup for a mean-reversion in lean hog prices. As mentioned previously, because we are looking at this as a counter trend trade, we like looking at the options market to help limit the risks if it were to continue higher. To discuss tailored strategies that are suitable for you, please reach out to the trade desk as we try to steer clear of blanket trade recommendations because every client’s risk profile is different.
Resistance: 86.225**
Pivot: 84.30-83.65
Support: 82.05-82.27, 80.90-81.20*
Weekly Export Sales
Net sales of 44,800 MT for 2024 were up noticeably from the previous week and up 16 percent from the prior 4-week average.
US detects H5N1 bird flu in a pig for the first time – Reuters
H5N1 bird flu was confirmed in a pig on a backyard farm in Oregon, the first detection of the virus in swine in the country, the U.S. Department of Agriculture said on Wednesday. Pigs represent a particular concern for the spread of bird flu because they can become co-infected with bird and human viruses, which could swap genes to form a new, more dangerous virus that can more easily infect humans. The USDA said there is no risk to the nation’s pork supply from the Oregon case and that the risk to the public from bird flu remains low.
Commitment of Traders
Funds are within arm’s reach of a record net long position. Friday’s report showed them net long 92,646 futures/options contracts.
Seasonal Tendency Update
Below is a look at historical price averages for February futures on a 5, 10, 15, 20, and 30 year time frames (Past performance is not necessarily indicative of future results).
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