Livestock Analysis | April 18, 2022

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Hogs

Price action: June lean hogs jumped $3.925 to $122.40, the contract’s highest closing price since $124.225 on March 30.

Fundamental analysis: Lean hog futures were powered in part today by bullish charts that prompted speculators to jump in on the long side. Grain futures prices also rallied, while crude oil jumped above $109 a barrel after falling below $93 last week. Firming cash fundamentals also supported hog futures. The CME lean hog index rose 79 cents today to $99.98, its third daily gain in a row. The index is projected up 35 cents at $100.32 for Tuesday. June hogs ended today’s session $22.08 above the cash index. Today’s five-day rolling average national direct cash hog price was $95.95. Pork cutout values early today rose $6.05 at $116.26, led by gains in bellies, hams and picnics.

Continued strength in the wholesale market would likely fuel upside in futures, as retailers ramp up purchases for spring and summer grilling. With retail beef prices near record highs, pork may gain substitution demand. Futures could also see further upside due to reduced hog numbers expected in the months ahead, based on USDA Hogs and Pigs Report data and high feed costs discouraging herd expansion.

Technical analysis: Lean hog futures bulls have the solid overall near-term technical advantage and gained more power today. The next upside price objective for bulls is to close June futures above solid chart resistance at the contract high of $127.325. The next downside price objective for bears is closing prices below solid technical support at the April low of $112.20. First resistance is seen at $123.00 and then at $124.00. First support is seen at $120.00 and then at today’s low of $118.70.

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 finished in the lower portion of today’s range. June live cattle fell 62.5 cents to $135.80, while the August contract dropped 95 cents to $137.375. May feeders fell $2.625 to $159.15, while August feeders dropped $2.875 to $171.475.

Fundamental analysis: Feeder cattle were sharply pressured by strong gains in the corn market. With the corn market nearing its all-time high, feeders will react sharply on days of price strength and are likely to see minor corrective gains on days when corn weakens. Strength in cash feeder cattle prices at the Oklahoma City auction failed to inspire buying in futures given premiums to the cash index in deferred contracts.

Live cattle traded modestly higher for much of the morning after stronger-than-expected cash cattle trade last week but eventually gave way to spillover from feeders. Cash cattle averaged $141.02 last week, up $2.20 from the previous week. Bullish traders and feedlots have hopes of higher cash prices again this week, though that would require breaking the pattern of up-and-down cash prices every other week over the past six weeks.

Choice beef prices weakened $2.01 this morning, while Select firmed 29 cents. Movement was light at just 38 loads, signaling limited retailer demand even amid sharply lower Choice prices.

Technical analysis: June live cattle futures posted a bearish outside day down. Strong followthrough selling on Tuesday would mark today’s high as a short-term top. Initial support is the 200-day moving average at $135.425, followed by the 10-day average at $135.06. Today’s high at $137.475 and the 100-day average near $137.50 are solid initial resistance.  

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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