Livestock Analysis | March 8, 2022

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Hogs

Price action: April lean hogs rose $2.65 to $102.925, while deferred contracts, including June, jumped over $3.00.

Fundamental analysis: Hog futures surged behind a technical recovery from yesterday’s drop to four-week lows and strength in wholesale pork. Pork cutout values jumped $4.59 early today to $111.24 amid strength across most cuts and movement totaling nearly 166 loads by midday. Signs that the cash market has topped out and expectations for seasonal weakness may limit upside, but the tight outlook for hog supplies should provide a floor under futures. The next CME lean hog index is expected to fall another 4 cents following a drop of 29 cents today (as of March 4) to $99.28. Seasonally, hog prices typically weaken in late winter before rallying to a summertime high.

Technical analysis: Hog futures appeared to arrest a sharp downturn and gain renewed bullish impetus today after the market fell to four-week lows yesterday. For market bulls, upside price objectives include closing April futures above resistance at the 20-day moving average around $104.85 and last week’s high of $107.45. For bears, downside objectives include closing April futures below support yesterday’s low at $98.475 and at $95.00.

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: Cattle futures extended yesterday’s rebound, with April live cattle climbing $1.15 to $139.05 and April feeders gaining 65 cents to $60.325.

Fundamental analysis: Cattle market fundamentals have changed little from last week, when futures nosedived, but trade focus seemed to shift from concern over geopolitics and economics to grocer’s historical tendency to step up beef purchases in most months. And while Lent may limit consumer beef purchases in early April, there surely be a spring demand surge after the comparatively late arrival of Easter April 17. April futures traded under this week’s early cash levels around $138.00, which may have motivated some buyers in light of the cash market’s tendency to rally into mid-to-late April.

Feeder futures are mostly trading opposite the corn and soymeal markets, with the seeming end to the Russia/Ukraine war surge losing upward momentum and this week’s weakness seeming to lift downward pressure from feeder prices. Sustained fed cattle strength would also support feeders, but grain markets will probably continue exerting outsized influence over yearling prices in the weeks ahead.

Technical analysis: Bears still seem to hold the short-term technical advantage despite April cattle futures seeming to have posted a “blow-off” bottom Friday. In particular, the contract’s dip to $133.50 and close at $135.775 established stout support at those levels. Yesterday’s strong bounce and today’s sizeable follow-through advance seemingly confirmed that idea. Late price action also seemed to establish solid support around $138.00, with a drop below that opening the door to test of last Friday’s pivotal levels. Conversely, bulls couldn’t force a significant test of initial resistance at the 10-day moving average at $140.21. A push above that level would have bulls targeting the looming intersection of the contract’s 20- and 40-day moving averages near $143.20.

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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