Livestock Analysis | May 16, 2022
Price action: June lean hog futures rallied $3.075 to $103.825 and July hogs gained $3.60 to $104.80.
Fundamental analysis: Short-covering and bargain-hunting boosted hog futures as the market extended a sharp rebound from 3 1/2-month lows late last week. Followthrough buying Tuesday and/or Wednesday would give bulls confidence to believe a near-term market bottom is in place. Seasonally, a price bottom is past due in the hog market.
Cash hog market fundamentals improved a bit to start the trading week. Pork cutout values early today rose $1.96 to $103.13, led by gains in butts and bellies. Movement was strong at midday, at 202.69 loads. The CME lean hog index is projected to fall 42 cents to $100.07 Tuesday (as of May 13). After strong price gains the past two sessions, summer-month hog futures are trading at premiums to the cash index again. The national direct five-day rolling average cash hog price today was quoted at $104.96. Recent USDA data suggests fewer hogs coming to market this summer, which, combined with the grilling season, may lift cash and futures markets in the near term.
Technical analysis: Bears still hold a near-term technical advantage with prices are in six-week downtrend on the daily bar charts, but the market is showing signs of a short-term bottom. June lean hog futures rose as high as $104.575, the contract’s highest intraday price since $106.725 on May 6. Today’s strong open left a gap between Friday’s high at $100.825 and today’s low at $101.40. Key support includes last week’s low at $97.10.
What to do: Cover all soybean meal needs in the cash market through May. Be prepared to extend coverage on further price weakness. You are hand-to-mouth on corn-for-feed needs.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have all soybean meal needs covered in the cash market through May. Be prepared to extend coverage on price weakness. You are hand-to-mouth on corn-for-feed needs.
Price action: Live cattle futures posted solid gains, led by a $1.55 rally in the August contract to $133.90. June live cattle firmed $1.10 to $133.175. Feeder cattle ended lower but in the upper end of today’s range. August feeders fell 60 cents to $167.425.
Fundamental analysis: Live cattle futures were supported by corrective buying, aided in large part by spillover from strong gains in the hog market. Big discounts in nearby live cattle to the cash market also encouraged corrective buying. Last week’s average cash cattle price was $142.44, down 98 cents from the previous week. Front-end supplies remain relatively tight, especially in the northern market, which has propped up cash prices recently. But packers bought a lot of cattle for deferred delivery over the past month and needs should be reduced, which suggests the cash market may weaken again this week.
Beef demand remains a concern for traders. Choice boxed beef values firmed $1.87 this morning to $260.82, but movement totaled only 34 loads, suggesting retailers remain selective buyers.
Feeder cattle were pressured by the strength in the corn market, though seller interest waned through the day. Cash feeder cattle prices were steady to weaker at today’s Oklahoma City feeder cattle auction, with demand reportedly better for heavier-weight calves.
Technical analysis: June live cattle are consolidating around the recent lows, which suggests the market is either pausing before moving the next leg lower or preparing for a corrective bounce. Bulls have a lot of heavy lifting before there are strong signs of a bottom. Initial resistance is the 10-day moving average around $133.315, which halted today’s price recovery. Bulls would need a close above the 20-day average at $134.755 to signal a short-term low. Support is at least week’s low of $131.025 and then the March low at $130.975.
What to do: Cover all soybean meal needs in the cash market through May. Be prepared to extend coverage on further price weakness. You are hand-to-mouth on corn-for-feed needs.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have all soybean meal needs covered in the cash market through May. Be prepared to extend coverage on price weakness. You are hand-to-mouth on corn-for-feed needs.
