Livestock Analysis | February 24, 2022
Price action: April lean hog futures fell $2.50 to $105.525, the lowest closing price since Feb. 16.
Fundamental analysis: Hog futures fell sharply for a second straight day as financial markets tumbled initially in response to Russia’s invasion of Ukraine, exacerbating concern over disruption to the global ag trade. Underlying pork fundamentals remain supportive, with hog slaughter totals expected to continue running about 4% below year-ago levels through spring and USDA’s monthly Cold Storage report showing U.S. frozen pork stockpiles as of Jan. 31 at 6.3% under year-ago levels and 22% less than the five-year average.
Still, elevated retail prices likely have traders worrying consumer demand will fall short of year-ago levels, which would dovetail with widespread with expectations for greatly reduced Chinese buying, since that country’s swine population has fully recovered from the ravages of African Swine Fever.
Given the sheer size of the late January-February hog rally, a setback is a short-term possibility, especially when the situation is viewed within the context of the market’s tendency toward weakness from mid-February into early April. Today’s bearish cattle market performance, along with big losses suffered by the equity indexes, probably weighed on hog futures as well.
Technical analysis: Bears hold a technical advantage in April hog futures in the wake of big losses posted the past two sessions. The 10-day moving average around $106.03 is initial resistance, with backing from today’s high at $109.65 and Tuesday’s high of $112.85 looking even stiffer. Still, a quick reversal and breakout to the upside would likely have bulls targeting $115.00, then $120.00. Support at the Feb. 9 high of $104.475 looks tentative, while the 20-day moving average near $102.53 looks more solid. A drop below that level would have bears targeting the Feb. 14 low at $101.00, then the psychologically important $100.00 level.
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.
Price action: April live cattle fell $2.45 to $142.30, the lowest closing price since Jan. 27. April feeder cattle fell $4.475 at $163.80, a two-month low.
Fundamental analysis: It was a risk-off trading day in the general marketplace after Russia launched an invasion of Ukraine. However, many financial markets, including U.S. stock and bond markets, had calmed down by early afternoon. President Biden in a speech to the nation at midday reiterated the U.S. has no plans to use its military to intervene against Russia’s aggression. Calmer markets late today suggest initial downside may have been overdone. Soaring corn prices pressured the feeder cattle futures, thought corn’s pulled back from sharp initial gains by the close.
Cash cattle this week have traded about $2 higher than last week, but volume is light ahead of tomorrow’s USDA Cattle on Feed Report. Choice grade beef cutout value at noon today fell 12 cents to $260.76, the lowest daily average since mid-December. Select grade was down $3.48 at $255.48. Movement was decent at 101 loads.
Seasonal factors still have the cattle market bulls encouraged. Fed cattle supplies are near annual lows and rising beef demand is likely as the spring grilling season approaches.
Technical analysis: Live and feeder cattle futures bulls have faded fast this week. A price uptrend on the daily bar chart for April live cattle has been negated. Live cattle bulls' next upside objective is closing April futures above solid resistance at $146.00. The next downside objective for bears is closing prices below solid support at the January low of $139.025. First resistance is seen at $144.00, then at $145.00. First support is seen at today’s low of $142.10, then at $141.00.
The next upside price objective for feeder cattle bulls is closing April futures above resistance at $170.00. The next downside price objective for bears is closing prices below solid support at the November low of $156.15. First resistance is seen at today’s high of $166.05, then at $167.725. First support is seen at today’s low of $162.025, then at $161.00.
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.
