Livestock Analysis | April 11, 2022
Price action: June lean hogs rose 45 cents to $115.025, nearer the session high. April hogs fell 60 cents to $98.425.
Fundamental analysis: Some tepid short-covering supported deferred hog futures today following recent selling pressure. The April contract faced pressure from the slumping CME lean hog index. Tomorrow’s index (as of April 8) is projected down another 43 cents at $99.63, which would be the eighth day in a row of declines. April futures will likely continue to see price pressure until the cash hog index at least stabilizes.
On the positive side, USDA’s midday pork report showed cutout values up a strong $8.59 at $111.75, led by gains of around $18 each in hams and bellies. Movement was decent at 142.83 loads. The five-day rolling average national direct cash hog price today was quoted at $99.46.
Solid weekly U.S. pork export sales last week gave producers some hope that better export demand will continue in the coming weeks, and that would work to put a price floor under the cash and futures markets. However, China will have to pick up its pace of U.S. pork purchases. A strong U.S. dollar at present will also make it more challenging for U.S. pork exports to show sustained improvement.
Technical analysis: Recent price action in June lean hog futures strongly suggests a market top is in place. Bulls and bears are on a level overall near-term technical playing field. The next upside price objective for hog bulls is to close June futures above solid resistance at $120.00. The next downside price objective for bears is closing prices below solid support at the March low of $109.15. First resistance is seen at $116.00, then $117.00. First support is seen at the April low of $112.20, then $111.00.
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.
Price action: Live cattle and feeder cattle futures finished high-range. April live cattle gained 70 cents to $138.525, while the June contract firmed 97.5 cents to $134.80. April feeder cattle rose a dime to $156.65, while the May contract firmed 52.5 cents to $159.90.
Fundamental analysis: Feeder cattle were initially pressured by strength in the corn market, which spilled over into live cattle. But as corn weakened late in the day, feeders turned mostly higher, which allowed corrective buying to surface in live cattle. The high-range closes in live cattle and feeder cattle could trigger mild followthrough buying, but price action is likely to remain choppy.
Last week’s average cash cattle price was $138.82, down 50 cents from the previous week, marking the fifth straight week of roughly steady prices. It’s likely the roughly steady cash trade will continue this week, with trade likely to get started and wrap up early since Friday is a market holiday.
Morning beef trade showed gains of 43 cents for Choice and $1.02 for Select, though movement was light at 36 loads. While wholesale beef prices are likely to rise more over the next four to six weeks, movement will be a critical component of beef trade.
Technical analysis: May feeder cattle dropped to the lowest level since early June 2021 before rebounding to near session highs on the close. That price action could be a sign bears are becoming exhausted. But it would take a close above old support at $163.075 and the 10-day average currently at $163.115 to signal a technical bottom.
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.
