Livestock outlook shows down trends
Estimates for the November through January livestock market show downtrends in live cattle, feeder cattle, lean hogs and soybean meal, while the long-term trend for cash corn shows a sideways slide to a slight movement up.
Darin Newsom, senior analyst for DTN, stated in a Nov. 3 webinar that the livestock market has been “incredibly volatile” lately.
“The trends in the price direction over time,” he said, “reflects the movement of investment money coming into or out of the market usually. A couple of the categories fall into that category.”
Newsom said he used several variables to put the outlook together, including futures trends – long-term (monthly), intermediate-term (weekly), investment money, futures spreads, market supply and demand, and seasonality – where markets tend to move a certain way during certain times of the year.
Newsom said for live cattle, the long-term downtrend has not yet ended.
“The December contract has posted a strong rally off its test of support near $126.50,” he said. “Worst case scenario has December cattle re-testing this level before establishing an uptrend.”
Looking at February cattle, Newsom said the contract could pull back to support between $141 and $138.50 before finding increased buying interest.
He said the seasonal index typically shows February contracts moving sideways between early November and late January.
The feeder cattle outlook, according to Newsom, shows the long-term trend remaining down with price support between $192 and $165.60.
January feeders, he said, could look to trend sideways between resistance at $189.10 and support in the $179.70 to $175.75 range.
He said the January to March futures spread continues to support the market.
The seasonal index for feeder cattle tends to move sideways from now through the end of the year.
Newsom said the lean hog outlook trend appears to have turned down, with the move to a new low as November gets underway.
The December contract is holding above its previous low of $57.05, but is positioned to move lower.
“Pressure could continue to come from both noncommercial and commercial selling,” said Newsom.
The February contract has extended its intermediate-term downtrend, and Newsom said fundamentals and momentum indicators show the contract could continue to move lower.
Seasonally, the February contract tends to move lower through late January.
The cash corn outlook calls for a sideways to upward trend, and Newsom said while the DTN National Corn Index’s monthly chart shows cash corn should work higher over time, the intermediate-term trend remains sideways.
“A bullish break-out won’t occur until the NCI moves above the previous high of $3.64,” said Newsom.
The long-term soybean meal outlook trend is sideways to down, with support at $295.10.
“Despite ongoing bullish fundamentals, indicated by the market’s inverted forward curve, December meal has failed to generate consistent non-commercial buying interest,” said Newsom.
He said support is near $303, followed by a major low of $286.
“March bean meal has drifted lower despite support from commercial buying interest,” said Newsom. “Secondary (intermediate-term) trendline support is pegged between $300.70 and $295.
Newsom said the seasonal index for soybean meal shows the market trending sideways over the next quarter.
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