Livestock Analysis | April 12, 2022

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Hogs

Price action: June lean hogs rose $3.45 to $118.475, the contract’s highest close since April 1. April hogs gained $1.20 to $99.625.

Fundamental analysis: Lean hog futures rose sharply as technically-driven speculative buying combined with surging U.S. inflation to spark a broad-based commodity market rally. Hog futures were also supported by prospects that high retail beef prices will encourage greater pork consumption and ideas cyclically lower hog numbers will exacerbate the usual seasonal spring supply decline. Pork supplies in cold storage are relatively low.

Pork cutout values fell 76 cents early today to $105.88, with bellies leading losses. Movement, at 178 loads, was decent by midday. Look for ham prices to remain elevated, which should continue to support overall cutout values. The CME lean hog index fell 43 cents today to $99.63, the eighth consecutive decline and a five-week low. The five-day rolling average national direct cash hog price was quoted at $98.74 today.

Technical analysis: Hog futures bulls regained momentum, producing a bullish upside breakout on the daily chart, suggesting more upside in the near term. Bulls have a near-term technical advantage. The next upside price objective for bulls is to close June prices above solid resistance at the contract high of $127.325. The next downside objective for bears is closing prices below solid support at the April low of $112.20. First resistance is seen at today’s high of $119.10, then $120.00. First support is seen at $117.00, then $116.00.

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: April live cattle climbed $1.425 to $139.95, while June futures gained $1.50 to $136.30, the highest closing price since March 31. May feeder futures advanced $1.025 to $160.925.

Fundamental analysis: Cash cattle trading was surprisingly active Monday, with over 4,000 head of live steers changing hands at an average of $140.94. That’s almost $2.50 above the limited quote posted April 4. Cash strength combined with continuing gains in wholesale beef (Choice cutout rallied 75 cents early today to $272.86, with Select rising $1.25 to $261.54), encouraged buyers. Traders may also have been anticipating sustained strength for the next week or two due to the fed cattle market’s history of April strength. Today’s feeder advance came despite sharp gains in the corn market.

Many in the industry are skeptical over short-term strength in the cattle market, as indicated by recent weakness in April futures. High retail beef prices are stoking concern over consumer demand, and the U.S. dollar’s resurgence may signal slower export demand. These factors, combined with a relatively plentiful supply of cattle in feedlots, suggest limited upside potential for cattle in the short term.   

Technical analysis: Bulls seem to own the short-term technical advantage in June cattle futures, but can’t be comfortable. Today’s high essentially matched the contract’s 40-day moving average near $136.67, which marks pivotal resistance. A close above that level would have bulls targeting the March 29 high at $138.525. then the psychological $140.00 level. Initial support is marked by the contract’s 10-day moving average near $135.25, with backing at today’s low of $134.50. A drop below that level would open the door to a test of Monday’s low at $133.525, then at last week’s low of $132.40.

May feeder futures seem to be balanced between bulls and bears after today’s action, especially after the strong rebound from support at yesterday’s low of $156.85. Today’s low likely marks initial support at $158.75. A drop below yesterday’s bottom would have bears targeting the $155.00 level, then the contract low of $153.00 established last June. Today’s high places initial resistance at $161.575, with backing from the 10-day moving average at $162.27. Look for additional resistance at the contract’s 20- and 40-day moving averages near $164.22 and $166.66, respectively.

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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