Livestock Analysis | March 22, 2022
Price action: June lean hogs rose 25 cents to $120.075, while April hogs lost 37.5 cents to $100.25.
Fundamental analysis: June lean hogs closed near the session high as bulls were able to recover early losses and extended yesterday’s strong gains. This suggests price action tomorrow and the rest of this week will favor the upside, including a challenge of the contract high of $122.00 posted last week. Cash market fundamentals remain strong, suggesting further gains in futures and cash markets.
The CME lean hog index price quote for tomorrow is projected down 3 cents at $101.77, down from a nearly seven-month high previously. Pork cutout values early today rose $2.87 to $104.48, led by hams. Movement at midday totaled 148.41 loads. Today’s five-day rolling average national direct cash hog price was quoted at $102.41. Hog slaughter so far this week totaled 947,000 head, up 2,000 head from the first two days last week but down 5,000 head from the same period in 2021.
The approaching spring grilling season, prospects for better U.S. pork exports in the coming weeks and high beef prices at the retail meat counter all favor hog futures and cash at least having floors underneath prices at present levels.
Technical analysis: Bulls in hog futures have a solid near-term technical advantage. The next upside price objective for bulls is to close June futures above solid resistance at $125.00. The next downside objective for bears is closing prices below solid support at the March low of $109.15. First resistance is seen at this week’s high of $120.825 and then at the contract high of $122.00. First support is seen at $118.00 and then at this week’s low of $116.325.
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 fell 62.5 cents to $139.425, while June fell 65 cents to $135.70. May feeder cattle futures slid 32.5 cents to $165.425.
Fundamental analysis: Live cattle futures remained burdened by concern over beef demand in a potential "stagflationary" environment. Such worries are likely overdone, given the historically firm performance of cattle and hog markets during previous recessions. Plus, the April live cattle contract is trading at a modest premium to last week’s cash average, implying minimal optimism over the usual early-spring price surge.
Few cattle traded yesterday, though some heifers changed hands at $141.00, up about $2.70 over last week’s average, suggesting firmer cash prices again this week. However, the bulk of cash trading may not occur before Friday’s futures close, with the monthly USDA Cattle on Feed Report scheduled for release that afternoon. Recent history has shown a pattern of packers and cattlemen in a standoff during weeks when the Cattle on Feed report is looming.
Still, we see few reasons to expect short-term cattle market weakness, especially with Choice beef cutout values marching higher. Choice values rose another 99 cents early today to $259.49. On average, choice cutout tends to continue rising to an annual high just before Memorial Day, which likely marks the peak of beef demand from grocers and retailers.
Technical analysis: The April live cattle contract seems generally balanced between bullish and bearish influences at this juncture, with bears holding a slight technical advantage. After trading above support at the contract’s 20-day moving average over the weekend, the contract dipped back below that level (around $139.65) today. That’s backed by psychological resistance near $140.00, then at last week’s high of $141.475. Bulls are likely targeting the 40-day moving average at $142.55, then the $147.00 level. Support at the 10-day moving average near $139.07 looks solid and is backed by the March 14 low of $137.40. Bears are likely targeting the May 10 low of $135.825, then the March low at $133.5.
Bears hold a technical advantage in feeder futures, especially after the May contract closed below 10-day moving average support at $165.80, a price that now marks initial resistance, with backing from the 20-day moving average at $166.60. A move above that level would have bulls targeting last week’s high at $169.25, then the 40-day moving average at $170.42. Look for initial support at the March 17 low of $165.10, with backing from the respective March 10 and March 4 lows of $161.55 and $159.25.
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.
