Technically Speaking

A Show of Support for Feeder Cattle

For over two years, April feeder cattle have held sideways between $128 and $155 and may be getting ready to challenge resistance. Prices fell to $135 recently, pressured by concerns about trade, the world economy and coronavirus, but found support last week from commercials attracted to feeders' cheaper prices (DTN ProphetX chart).

Feeder Cattle:

April feeder cattle closed up $3.87 last week at $141.37, the first decent rebound prices have seen since dropping over $9.00 in January. Several ag prices lost ground since the start of the year, pressured by disappointment over the terms of the phase-one agreement with China, concerns about a slow world economy and by the potential spread of coronavirus. Overall however, the U.S. economy is doing well and retail beef demand has been stable so the early sell-off in 2020 is questionable. Adding to the notion that early selling may have been overdone, CFTC data showed commercials were net long 3,982 contracts as of Feb. 11, a modest sign of support for feeders' lower prices by the part of the market that knows demand best. Last week's higher close did not quite turn the weekly stochastic up, but it was close. With support likely at $135, spot feeder prices look poised to challenge the 2019 high later in 2020.

Live Cattle:

April live cattle ended up 52 cents last week at $120.32, making a quick recovery from Wednesday's new four-month low. Similar to feeder cattle above, cattle prices were under pressure early in 2020, but found support for a higher close last week that was able to keep April prices near the center of their three-year trading range. CFTC data showed noncommercials net long 57,217 contracts of live cattle as of Feb. 11, indicating some liquidation since the first of the new year, but also enough to be concerned about the potential for more selling ahead. From a technical view, April cattle are holding a sideways range between roughly $110 and $130 and show no sign yet of threatening a breakout.

Lean Hogs:

April lean hogs dropped $1.95 last week, finishing at $64.30. The first 45 days of 2020 have not been kind to April hog prices, now down over $13.00 since the end of 2019, and near their lowest prices in almost a year. Early pork exports are doing much better than a year ago at this time, but pork cutout values have dropped to their lowest level in 11 months, pressured by a 4% increase in year-to-date pork production. Technically, the weekly stochastic is close, but not yet to the place of showing a bullish change in momentum. Commercials are net short 6,307 contracts as of Feb. 11, not yet finding these cheaper prices attractive. Technically, April hogs have long-term support at $53.00, but are showing no sign of turning higher yet.

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 @ToddHultman1

(AG/CZ)

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