Technically Speaking

With a few brief exceptions, spot live cattle futures have been trading higher ever since April 2020, a time when pandemic fears ran high. That same uptrend continued again last week as April cattle closed at $164.12 Friday, Feb. 3, 2023, up $3.30 on the week and at its highest weekly finish since the final days of 2014. Fundamentally, the bullish arguments for cattle prices were given a boost Tuesday afternoon when USDA reported U.S. cattle inventory at 89.3 million head, the lowest since 2015; 28.9 million beef cows were down 4% from a year ago and were the lowest number on record going back over 50 years. It is no surprise drought in the western U.S. Plains has led to a massive herd liquidation and it is important in this scenario to keep in mind higher cattle prices haven't necessarily meant good times for cattle producers as hay and water have been difficult to obtain and corn is expensive. Technically speaking, spot cattle prices remain in a strong uptrend and given the fundamental context, overbought signals in the weekly stochastic have been largely unhelpful. Lacking any sign of significant weekly reversal, the trend in live cattle remains up.

Similar to live cattle, March feeder cattle have also been in an uptrend since April 2020, but the trend has been punctuated more often by sideways periods of choppy trading, more like stairsteps with the latest resistance limiting prices below $190 since mid-August. March feeder cattle closed at $186.10 Friday, a gain of $2.62 on the week with support from the same inventory report described above. These prices near $190 are the highest since October 2015 and have been restrained by the expensive input costs of feeding young cattle to slaughter-ready weights. Technically speaking, feeders' uptrend remains intact after a recent test of support near $180, their lowest prices in three months. Higher prices seem likely ahead, but a close below $180, if it happened, would challenge that view.

April lean hog prices have been under bearish pressure in early 2023, but are possibly finding support after closing at $86.47 Friday, up one tick from the previous Friday. Granted, a 2-1/2-cent gain in a week is nothing to brag about, but consider how spot lean hog prices haven't traded below $70 since the early days of 2021 and the most recent attempt to get near $70 was rebuffed in early October by a weekly reversal that left a low of $72.97. On Wednesday, Feb. 1, April lean hogs briefly fell to a new three-month low of $82.75, but prices were not allowed to stay. I can't yet say last week's low will stand as support, but that is what I suspect, encouraged by the one-tick gain on the week. Negotiated hogs in Iowa closed at $73.10 Friday, a modest gain on the week, and have also possibly found support after trading briefly below $70 in mid-January.

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Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grain and soybean futures involve substantial risk and are not suitable for everyone.

Todd Hultman can be reached at Todd.Hultman@dtn.co

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