Technically Speaking

Live Cattle Poised to Challenge Old Boundaries

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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The last few years, April live cattle have traded within a well-defined range between $110 and $130. Will demand in 2020 be strong enough to take prices higher? (DTN ProphetX chart).

Live Cattle:

April live cattle ended up $1.02 last week, keeping prices near the contract high of $128.55, set earlier this month. U.S. cattle slaughter was up roughly 1% in 2019, and the same is expected for 2020, while African swine fever in Asia has perked up meat demand, in general. Technically speaking, April cattle prices have held below $130 since the spring of 2016, and $130 will be an important mark of resistance to watch for in 2020. Noncommercials started adding to net longs in cattle in October, but have not built up a dangerously large position yet. There were 92,822 net longs as of Dec. 17, which is just over half of what we saw in late April, 2019. April cattle have a chance to exceed $130 in 2020 but will need help from the U.S. economy, world demand and possibly adverse weather.

Feeder Cattle:

April feeder cattle closed up $0.80 last week, finishing at $147.30 and close to an eight-month high. Like live cattle, feeder prices have been helped by increased demand in the final quarter of 2019 and have a chance to benefit from limited U.S. supplies and increased demand in 2020. Technically speaking, April feeder cattle prices have stayed under $159 since the spring of 2016, and that will be the line of resistance to watch in 2020. This year's low of $127.35 after the Tyson fire marked a two-year low and should hold as support. Noncommercials had a modest position of 5,704 net longs as of Dec. 17, which suggests some bullish optimism in the market, but not enough to threaten prices yet.

Lean Hogs:

April lean hogs ended last week 37 cents higher, a modest gain over the holiday week. African swine fever was a big topic in 2019, and even though it did not have the big bullish splash in the U.S. that hog producers hoped for, it is a significant international problem and is likely to provide support for U.S. pork prices again in 2020. Technically speaking, April hogs appear to have found support in the low $70s in the latter half of 2019 and are apt to trade in a higher range in 2020 than what we saw from 2015 to 2018. A bullish factor in favor of higher hog prices at the moment is the Commitments of Traders report showing commercials slightly net long as of Dec. 17 -- a supportive response to current prices.

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

Follow him on Twitter @ToddHultman

(BAS/CZ)

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