Livestock Analysis | February 14, 2022

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Hogs

Price action: April lean hogs rose 10 cents to $102.325, while February hogs expired at $91.625, a gain of $1.125.

Fundamental analysis: Lean hog futures bulls are working to stabilize the market after last week’s spike to a contract high followed by an abrupt selloff that produced some chart damage. Still-solid cash market fundamentals will make it difficult for bears to press their case much further. Pork cutout values rose another $6.36 early today to $116.32, led by a gain of $17 in hams. Movement by midday was 151 loads. The CME lean hog index projected to rise another $1.59 to $90.51, the highest since mid-October. The national direct five-day rolling average cash hog price is quoted today at $79.89.

The premiums spring and summer lean hog futures contracts hold to the cash index suggest traders anticipate elevated hog prices heading into spring. Also, hog slaughter figures show hog supplies are falling below the 6.0% annual reduction indicated by USDA in the December Hogs & Pigs Report, which should also continue to support the hog market.

Technical analysis: Lean hog futures bulls have a solid near-term technical advantage. However, prices last week scored a bearish “key reversal” down on the daily bar chart, raising the prospect that a market top is in place. Still, prices are in a nine-week uptrend. The next upside price objective for bulls is to close April futures above solid resistance at the contract high of $107.70. The next downside objective for bears is closing prices below solid support at $97.50. First resistance is seen at today’s high of $103.825, then at $105.00. First support is seen at today’s low of $101.00, then at $100.00.

What to do: You are hand-to-mouth on corn-for-feed and soybean meal needs. Wait on an overdue corrective pullback to extend coverage.

Hedgers: Carry all risk in the cash market for now.

Feed needs: You remain hand-to-mouth on soybean meal and corn-for-feed needs.

 

Cattle

Price action: April live cattle rose 17.5 cents to $146.35 following choppy, two-sided trade. April feeders strengthened 80 cents to $171.50.

Fundamental analysis: Cattle futures swung both directions today before posting a firm close, suggesting the selling pressure late last week was likely a correction in a bull market. Price action the next couple of days will determine if that’s the case or if the market is headed for a deeper pullback. Last week’s average cash cattle price of $140.48 was up 72 cents from the previous week, but it wasn’t as high as some anticipated. This week’s cash market trade will likely be slow to develop and packer bids may not be established until around midweek. Futures price action the next couple of days could influence cash action, especially if there’s a strong move up for down.

Morning beef trade featured firmer prices, with Choice cutout values rising 24 cents to $274.76, but packers moved only 27 loads of product, suggesting there’s still retailer resistance to higher prices. If that doesn’t change, packers would likely have to lower prices or move more product into storage.

Cash feeder cattle prices were solidly higher at the Oklahoma City feeder auction, though the early price action was described as a “light test.”

Technical analysis: Volatility has increased in April live cattle futures after the contract pushed to a new high to start February. Bulls still have the technical advantage, but near-term price action will determine if the market is pausing before another push higher or in the process of topping. Initial support is today’s low at $145.275, followed closely by last week’s low at $145.225 and the 38.2% retracement of the strong rally from the January low to last week’s contract high, which would be near $145.00. If bulls successfully defend those support levels, a challenge of the contract high at $148.70 would be likely. If that support falters, a pullback to at least the $144.00 to $142.00 range would be likely.

What to do: You are hand-to-mouth on corn-for-feed and soybean meal needs. Wait on an overdue corrective pullback to extend coverage.

Hedgers: Carry all risk in the cash market for now.

Feed needs: You remain hand-to-mouth on soybean meal and corn-for-feed needs.

 

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