Chinese government support may help US hogs.

Livestock

April fed cattle and March feeders both pushed above recent highs from three days ago. Beef has not stopped its strong rebound.

Allendale had already released 2024 beef estimates back at the last AgLeaders Conference in early December. Today's numbers were lightly changed from that. We have beef production -4% this year at 26.1 billion lbs. We see the February at $173, April at $179 and June at $176. We expect the big restart to the 2023 - 2026 falling supply story to show in the later part of the year. Our December futures outlook has been upped from $188 to now $193.

After wholesale beef's $22 rally we had expected it to stabilize. Instead today's morning report was +2.34. Choice is now +25.11 over 13 days.

Last week the South traded $173. The North sold at $173 live and $273/$274 dressed.

Showlists, offered finished cattle for packers to buy for next week's processing, was estimated +11,100 head from last week. Given the fact we still have a weather related processing backup this is expected.

USDA's monthly Cattle on Feed report on Friday would be called neutral. December placements, inflows into feedlots, were counted at 1.704 million head, -4.5% from last year. The trade estimate was -4.6% from last year (ALDL -2.5%). December marketings of finished cattle were estimated at -0.9% from last year. The trade estimate was -0.7% (ALDL +0.7%). The December 1 count of all Cattle on Feed was reported at +2.1% from last year. The trade estimate was +2.1% (ALDL +2.2%).

The one month rebound for April live cattle continues. New highs for this rebound were made today. Chart gaps are waiting, 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. Interesting to see no interest in filling gaps waiting at lower prices.

The March feeder cattle chart pushed to a new high for this rebound today. 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.

Summary: Our price outlook suggests higher prices ahead. This is also a seasonally supportive time of year anyway. 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 0.02.

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Hogs

News that China's government would support its stock market, and also that needed sow liquidation targets were near, supported US hog futures. Today's trade was a breakout on the April.

Allendale had already released 2024 pork estimates back at the last AgLeaders Conference in early December. Today's numbers were lightly changed from that. We have pork production minimally over last year at 27.3 billion lbs. We see the February at $74, April at $82 and June at $102.

While the US stock market has been on a wildly bullish drive higher the Chinese stock market has dropped to 2020 levels. China has been a lightly bearish story with both too high pork production and too little demand for it. Overnight China's government cabinet suggested they would take “forceful and aggressive measures” to stabilize market confidence. In the US hog market's view, perhaps that means better Chinese pork demand ahead.

A second China story also came out today. Their sow herd at the start of the year was almost 44 million head. The government's goal is 41.2. The ag ministry today suggested end of December sow herd numbers down to 41.42. China is almost ending its long needed sow liquidation. Perhaps by spring this will result in lower pork production year/year.

Light gains for cash hogs have pushed the Lean Hog Index to 68.75 The current low is 65.05 from 12/29.

As of Monday cash pork is 8.82 off the current 12/21 low. Today's morning report was -0.42.

The April lean hog futures chart today showed something positive. A push above prior December and January highs was made and it held into the close. Bulls can now pick out chart gaps to fill. 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. Today the April broke resistance. Cash prices are still a little sluggish. This market has quickly forgotten the processing backlog from weather two weeks ago...Rich Nelson

Working Trades:

(11/15) Sold February 66 hog put 1.90, 1/16 move risk to 1.80, objective 0. Closed 0.05.

(11/30) Sold February 66 hog put 1.45, 1/16 move risk to 1.80, objective 0. Closed 0.05.

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