Livestock Analysis | March 4, 2022
Price action: April lean hog futures fell the $4.75 daily limit to $100.45, a four-week low and a decline of $3.225 for the week. May and June contracts also closed locked limit down.
5-day outlook: Friday’s gap-lower trade in April lean hog futures produced a technically bearish weekly low close suggesting followthrough selling early next week. Today’s price action formed a bearish head-and-shoulders top reversal pattern on the daily chart in April futures suggesting the market has topped. The major breakdown in live and feeder cattle futures this week also spilled over into hogs. The next CME lean hog index is expected to fall 13 cents to $99.57. The national direct five-day rolling average cash hog price is last quoted at $91.36. Pork carcass cutout values rose $1.54 early today to $107.95, led by gains in hams and bellies. Movement totaled 158 loads by midday.
30-day outlook: Geopolitics will likely remain on the front burner for the next few weeks. The uncertainty over the Russia/Ukraine war will likely continue to favor market bears amid concern over disruption to U.S. beef and pork exports to Europe and Asia. Also, the recent slowdown in the late-February cash hog market surge underscores the hog market’s historical tendency for late winter-early spring weakness that may be looming.
90-day outlook: The impending U.S. spring offers longer-term support for the pork market as retailers stock up on grilling cuts, while animal supplies are expected to remain tight. If geopolitical tensions ease, livestock markets should return to trading on supply and demand fundamentals. Hog supplies are likely to reach cyclical and seasonal lows in early summer.
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 $2.575 to $135.775, down $6.15 for the week and a five-month low. April feeder futures plummeted $3.275 to $157.25, a weekly plunge of $7.50.
5-day outlook: Concerns over spring demand due to high retail beef prices and the Russia/Ukraine war likely will hang over the market for the near-term. Wholesale beef prices extended a slide this week, while the cash market ended a four-week upswing. But history suggests grocers will buy beef actively for early-April features. Market-ready fed cattle supplies should also be near the lowest levels of the year. But continued grain market gains and/or slumping equity indexes could keep exaggerating price pressure. Technicians might contend that the sharp April futures rebound from Friday’s low at $133.50 marked a short-term bottom. Shifts in corn and soybean meal futures will likely exert enormous influence over feeder futures.
30-day outlook: Fed cattle supplies will likely remain near annual lows in early March, then begin expanding toward seasonal summer highs. The increased supply is typically met by surging demand as grocers and consumers start gearing up for the spring grilling season. Obviously, the geopolitical situation and the downstream consequences of the Russia/Ukraine war hold the potential to cause dramatic moves up or down in the coming weeks. Bulls may be worried sliding fed cattle prices will cause producers to slow fed cattle marketings and create a backlog in feedlots, especially if retail beef prices remain elevated. Conversely, sustained beef demand similar to last spring could power a fresh move to the upside. Feeder futures will also be closely focused upon the grain markets and feed costs.
90-day outlook: Fed cattle supplies regularly expand from late-winter lows to early-summer highs. That may limit the bullish potential of the usual spring rally; it certainly tends to depress the market as supplies increase, especially after grocers complete their purchases for the spring-early summer grilling season in June. The state of the economy, market-ready fed cattle supplies and the levels attained by retail beef prices could greatly influence fed cattle prices during the second quarter and beyond.
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.
