December live cattle fell $3.92 last week to a new contract low of $99.75, mimicking a similar decline in boxed beef prices as packer margins remain unusually high since the Tyson fire in early August. Even before the fire, live cattle prices had been falling, pressuring noncommercials to liquidate after being caught with their most bullish holdings on record in April. Technically, the trend in live cattle remains down, but noncommercial net-longs are down to 29,550, closer to neutral. December cattle prices are still looking for support and may challenge the 2016 low of $96.10.
In spite of last week's loss in live cattle prices, November feeder cattle actually gained a nickel to $130.37 last week and are still hovering near their contract low at $127.97. Noncommercials and managed futures funds are already net short, suggesting support could be near. The weekly stochastic has not turned higher yet, but so far, prices have been reluctant to trade below $130.
December lean hogs tried to trade higher last week, but a $3.00 limit-down drop on Friday gave prices a 90-cent loss on the week, ending at $62.47. Hogs remain easy to come by and the slaughter pace is up 3% in 2019 from this time a year ago, less than USDA's estimated 5% increase. Exports to China remain less than hoped for earlier this year and noncommercials have been painfully slow to liquidate their net-long positions, now down to 31,036. All the above continue to pressure hog prices lower in 2019. Technically, the one-year low at $51 is a possible site of long-term support.
Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of livestock and livestock futures involve substantial risk and are not suitable for everyone.
Todd Hultman can be reached at Todd.Hultman@dtn.com
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