Cattle prepare for higher cash trades. Beef is not onboard though.

Livestock

Bids posted today, with even a few confirmed actual trades, would suggest higher trade this week. Wholesale beef pushed to new downtrend lows though.

Confirmed trades in the North at $175 today helped stabilize the market. We hesitate to suggest this is a valid market test as it held high quality cattle. It would be a more than expected given last week's $172 trades in both the South and North. Last week dressed trades were $273. Dressed bids today are $275.

In contrast to higher cash cattle, wholesale beef continues to wallow. Yesterday's ending price for choice was tough at -5.37. That brought choice beef to a new low for its long term downtrend since June. Today's morning report added to problem with -2.57.

February Live Cattle Futures Seasonal: We monitor seasonal price trends but are not tied to them. The seasonal for fed cattle futures is a general long term rally to November 26 then a quick and very sharp price break to December 9. After that significant low there is a general rally into expiration. We will point out this year the peak was a bit early on September 19. If the seasonal would hold true then a major low would be directly behind us. The current low was made December 7. Given the extreme severity of the decline already seen we hesitate to suggest seasonals will be on target this year.

On the chart February fats posted a strong trade on Tuesday. Lower trade in today's session was rejected, a positive sign. This recent leg up has also broken the main downtrend line. Futures are now neutral, no longer in a downtrend. Bears may have a small argument here as we still have an intraday gap open to the 12/29 close at 168.50. That may need to be filled before higher trade is accepted. We do not expect the much lower open gap, the 12/7 close at 162.52, to be filled. Bulls note a a minor upside intraday gap from the 11/22 close at 175.27, two daily chart gaps way up there at 184.70 - 184.90 then 186.65 - 187.52 and two intraday gaps at even higher prices. They are at the 10/18 close of 191.07 and the 10/2 close of 193.17.

The feeder cattle chart had already broken its downtrend lines and is considered neutral. Bears will note there are two open chart gaps at lower prices but we are unsure if they will get filled. They are the 12/13 close of 217.85 and the 12/7 close, 211.17. Bulls have a few upside chart gaps to discuss. They may feel a little better about discussing these due to recent positive trade. The daily chart shows one at 244.75 - 245.37. Intraday charts show unfilled closes from 11/22 at 230.12 and 10/18 at 253.60.

Summary: Futures still imply lower trade for cash cattle into Q1. We disagree with that view. If we had wholesale beef on board with futures and cash then we would be more aggressive with long-type trades. We consider ourselves bulls here but only expect a limited rally to the 50% retracement mark, 179.50 on the February live cattle contract. Please have a risk in place for all speculative trades...Rich Nelson

Working Trade:

(12/28) Sold February live cattle 164 put 1.45, risk 2.80, objective 0. Closed 0.80.

Hogs

Today's mixed/lower trade helped futures see a new low for this long term downtrend. Until cash markets establish seasonal lows, futures are removing normal premiums.

Cash hogs trade on the first day of the new year was +0.99. That helps bring the two day Lean Hog Index up to 65.19. Yesterday's 65.05 is the lowest of this long seasonal downtrend.

February futures currently hold a 14% discount from the 2023 settlement of 75.62. This belief would occur with production minimally over last year. February futures are currently priced as though there will be no increase in cash hog prices over the next six weeks.

Cash pork on Tuesday was +0.34. Pork was +3.75 from the current 12/21 low. Today's morning report was -2.33.

February Lean Hog Seasonal: We monitor seasonal price trends but are not tied to them. The seasonal for hog futures, not cash hogs, is for a rally from November 6 to November 25 then sharp break into December 17. That becomes the final major low. After a minor rally to January 5 then minor break to January 11 this contract then rallies into expiration.

Charts on futures remain bearish. New lows for this long term downtrend were made again today. Bears will note we not only filled that downside target, the unfilled intraday gap to the 12/13 close, but also traded below that point after the gap fill. Bull points to monitor are currently on hold. They are the intraday gap to the 12/22 close at 71.35. Then you've got current resistance, 50% retracement at 71.80. Then there are multiple upside intraday gaps still open. They are 75.05 from 11/20, 77.02 from 11/13, 78.60 from 9/28 and 80.90 from 9/20.

Summary: We're back to the discussion we had in early December. Yes, this seasonally is a time when a low "should" be made. 2024 futures prices are at levels that “should” be considered a value. But those are not reasons to buy futures with both hands. We're still waiting for a seasonal low in cash markets which should have been weeks ago. Please use a risk order for all speculative trades...Rich Nelson

Working Trades:

(11/15) Sold February 66 hog put 1.90, risk 3.80, objective 0. Closed 2.40.

(11/30) Sold February 66 hog put 1.45, risk 3.80, objective 0. Closed 2.40.