Cattle push to new highs for the uptrend.

Livestock

The best trade since 11/22 was posted for April live cattle futures. March feeders jumped to its best pricing since 11/20. The fledgling uptrend since early December now has more solid footing.

USDA's weekly Actual Slaughter report detailed meat production statistics for the first week of January today. The trade monitors this report for weight data. For clarification this report covers 1/1 - 1/6 slaughter numbers. This does not include last week's early snows in the Northern Plains nor the later week temperature drop seen for all. Dressed steer weights fell 4 lbs. from the last week of December, heifers increased by 2. Seasonally, weights have peaked for the season and are now on the decline into summer. With that in mind our focus remains on the year over year comparison. Dressed steers are currently 18 lbs. over last year. Dressed heifers are 20 lbs. over. Separate from quantity of head going into plants higher weights would be added back 2.1% to beef production. Next Thursday's update for this report will cover last week's weather stress impact. That stress impact will take two weeks to filter into these numbers.

Through Wednesday 22.55 has been added to choice wholesale beef over nine days. It's a great rally. We will note this time of year is often one to see post-holiday gains reigned in. We don't expect this to last forever. Today's afternoon report was -2.16.

We classify the backlog from last week's processing disruptions as moderate at 118,000 head. Interestingly, today's run was estimated at only 118,000 head. That was under our morning view of a normal run of 124,000.

Cash cattle last week, $172 in the South, was under the prior week. Nebraska traded $173 and $273 on average last week for live and dressed.

On Friday USDA will release the next monthly Cattle on Feed report. As you know, May - October placements were a problem at +0.6% vs. prior year. That stopped the prior trend of clear year over year declines. We have the first half of 2024 beef supply set from those prior lightly higher placements. The trade is now wondering if/when the next change will be seen. Last month's report showed November placements -1.9% from last year. The trade estimates December placements -4.6% from last year (ALDL -2.5%). So we are not fully in the transition yet back to clear year over year declines. December inflows help determine a part of July - October fed cattle supplies. December marketings of finished cattle were estimated at -0.7% (ALDL +0.7%). The December 1 count of all Cattle on Feed is estimated to decline from the November 1 +2.7% estimate to +2.1% (ALDL +2.2%).

The one month rebound for April live cattle continues. Bulls are slowly getting control of this market. New highs for the uptrend today filled one upside gap, the intraday one to the 11/22 close of 177.65. Past this point bulls also have many points to monitor. There is an intraday gap at the 11/15 close of 180.47 then two daily chart gaps, 187.30 - 187.55 and 189.02 - 190.27. Bears are now on the sidelines. Interestingly, they still have chart points that so far the trade is ignoring. There is still a gap open down to the 12/29 close, 172.25. Another is down at the December low, the the 12/7 close at 165.95.

The March feeder cattle chart shows a one month rebound from a terrible three month break. Today's trade filled the first upside intraday gap, 230.12, and continued. There are many points suggesting further gains ahead. There is a daily gap at 244.75 - 245.37 then intraday to the 10/18 at 253.60. We did not get any real down move to fill bearish points on the chart. Those points are gaps the 12/13 close of 217.85 and the 12/7 close of 211.17.

Summary: A new high was made for this one month uptrend. This is typically a seasonally supportive time of year so we'll see how much upside is still ahead. We're using a 50% retracement of the downtrend as an upside target. On the April fats it is at 182.60. Between fats and feeders we would suggest feeders have a more valid upside discussion. Fats will have to wait for Q4 to see the next phase of tightening supplies. For feeders, that comes a few months ahead..Rich Nelson

Working Trade:

(12/28) Sold February live cattle 164 put 1.45, risk 2.80, objective 0. Closed 0.07.

Hogs

Hogs traded mixed today. That's positive considering the reminder of China's low import interest. In the short term, we have backlog of market ready hog numbers to get through.

China's General Administration of Customs reported December pork imports at 90,000 tonnes. That was -54% from last year's December. It is also the lowest monthly import since February of 2019. Their 2023 calendar year, January - December, saw imports of only 1.55 million tonnes, -11.7% from last year. With China's excess pork production annual imports have fallen sharply from 2021's large 3.71 mt import.

Much of the trade falsely believes China's multi-month effort to liquidate the sow herd means that pork production is falling. This is like turning a cruise ship. We are not yet at that point of lower than last year production. China's National Bureau of Statistics reports 2023 pork production, January - December, at 57.94 million tonnes. This is a new all-time record and a large 4.6% increase over last year. Even in Q4, when sow liquidation was ongoing, production was +7% from 2022.

Dressed barrow/gilt weights increased 1 lb. from the last week of December to the first week of January. Dressed hog weights are -1 lb. from last year.

Last week was a problem for US hog slaughter. Western Cornbelt plants were impacted by weather early in the week and the East was hit later. On Friday USDA's estimate for the week was a bit of a surprise at 2.279 million. Last week's shortfall is estimated at 569,000 head.

Cash hogs, with +0.14 yesterday now have an LHI of 67.87. The current low is 65.05 from 12/29.

As of yesterday cash pork is 6.61 off the current 12/21 low.

The chart perspective for lean hog futures has changed. Bulls still have many upside targets to discuss. On the April they are the intraday gaps 75.05 from the 11/20 close, 77.02 from 11/13, 78.60 from 9/28 and 80.90 from 9/20.

Summary: The downtrend is broken and prices have recovered. This is still not exactly a solid market for bulls. Prices have simply returned back to economic value/where they should be. Please use a risk order for all speculative trades...Rich Nelson

Working Trades:

(11/15) Sold February 66 hog put 1.90, 1/16 move risk to 1.80, objective 0. Closed 0.17.

(11/30) Sold February 66 hog put 1.45, 1/16 move risk to 1.80, objective 0. Closed 0.17.

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