Technically Speaking

Weekly Analysis: Livestock

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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Live Cattle:

April live cattle gained $0.88 last week to $124.50 per cwt, challenging its highest prices of 2018. Cattle prices benefited from firm U.S. beef demand in 2018 with exports up 14% from a year ago. USDA expects production to maintain a steady 3% increase in 2019. Winter storms can add short-term volatility to prices at times, and noncommercials have lightened net-shorts to reduce their exposure. While the trend in April cattle is currently up, $130 per cwt is the highest April price posted in the past year and a half and is likely to be a formidable source of resistance in early 2019.

Feeder Cattle:

March feeder cattle closed up $3.90 last week at $145.77 per cwt, near their highest price in a month. From a weekly perspective, prices corrected lower since early October, and this week's gain turned the weekly stochastic higher, suggesting the uptrend in feeders could be ready to resume. The price of $158.92 per cwt in March feeder cattle has been the high for over two years and would be the major resistance level to watch in early 2019. As of Dec. 11, CFTC reported commercials net-long 5,400 contracts and managed futures funds net-short 5,521 contracts of feeder cattle, a favorable environment for prices to work higher. Compared to live cattle, feeder prices appear to have the more bullish potential.

Lean Hogs:

April lean hogs fell $2.27 last week to $70.05, still not far from their highest prices in 2018. Meanwhile, U.S. pork production is going full steam with USDA estimating last week's slaughter total at 2.61 million head and predicting a 5% increase in pork production in 2019. The increased production should keep packer demand for hogs busy as long as retail prices hold up, but that will be the challenge for 2019. A chance for increased pork exports, related to African swine fever in China, is also a possible bullish factor. Technically, however, trading above the almost four-year high of $77.25 may be difficult, especially with managed futures funds already net-long 35,176 contracts as of Dec. 11.

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

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