Feeders post a new high close for this fledgling uptrend.

Livestock

April fed cattle futures were able to lightly surpass the 1/8 highs, resistance, before closing just under. March feeders pushed over their resistance levels and also posted a new high close for this fledgling uptrend. Wholesale beef is finally on board with its normal seasonal rally.

Wholesale beef continues to recover with strength. Including today's morning report of +2.94 choice has gained +22.03 over 10 trading sessions. Seasonally, this move is not out of bounds.

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 April live cattle chart shows a light uptrend. Though today's trade did not close above resistance it did lightly break it. There is still a gap open down to the 12/29 close, 172.25. That is still a reasonable short term target. We do not expect the much lower open gap, the 12/7 close at 165.95, to be filled. Bulls are slowly getting control of this market. A break above the rejected high from last week, 175.72, would open up further upside. 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.

The feeder cattle chart is in a light uptrend. Different than live cattle, today's trade pushed above the prior two weeks of sideways action. It was the highest trade since 11/24. We are also facing that first chart gap directly ahead on the upside. Upside gaps are intraday to the 11/22 close at 230.12, daily gap at 244.75 - 245.37 then intraday to the 10/18 at 253.60. We would like to fill at least the first downside gap on this chart before the bull pattern is established, the 1/5 close at 224.15. We don't expect the others to get filled, the 12/13 close of 217.85 and the 12/7 close, 211.17.

Summary: The current cattle trade would appear to suggest this market is okay with leaving unfilled intraday gaps at lower prices. With beef finally showing gains we can't argue...Rich Nelson

Working Trade:

(12/28) Sold February live cattle 164 put 1.45, risk 2.80, objective 0. Closed 0.10.

Hogs

Bull spreading in futures was a lightly positive sign. We still have a backlog in hog numbers to process but the trade is also noting stability to higher prices in cash markets finally, despite the backlog.

USDA finally reported a normal hog kill. Today's run was estimated at 489,000 head. That was next to our morning view of 485,000. We're back to normal. Now we have to make up for the recent backlog.

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 +0.94 on Tuesday, now have an LHI of 67.34. The current low is 65.05 from 12/29.

As of Tuesday cash pork is 6.44 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 0.20.

(11/30) Sold February 66 hog put 1.45, 1/16 move risk to 1.80, objective 0. Closed 0.20.

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