Livestock Analysis | March 13, 2023
Price action: April lean hog futures sold $1.225 lower to $86.225, posting a mid-range close.
Fundamental analysis: April lean hog futures saw sympathy selling alongside most risk assets today. Today’s session looks like profit taking following Friday’s extended rally. Despite weak futures, cash demand remains strong with midday pork cutouts were $4.77 higher at $92.57 on 113 loads, returning to the highest level since October 2022. Despite weak front month futures, the market seems to be pricing in increased summer grilling demand, which is evidenced by delayed contract strength today.
Technical analysis: April futures traded in a $1.675 range before settling at $86.225. Solid near-term support lies near the 40-day moving average near $85.90, with additional support 10-day moving average around $85.21 and then at $84.15. Bears want to force a lower low after Friday’s lower high, aiming to take out the $83.20 low formed on March 7. Additional support comes in at Friday’s low, $85.00, with $85.55 on the way. Conversely, bulls want to overtake the February high at $89.875 and make a new high with resistance at $87.50 and $88.50 on the way.
What to do: Get current with advised feed coverage. Be prepared to extend coverage on additional price pressure.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have all soymeal needs covered in the cash market through the end of March. You have all corn-for-feed needs covered in the cash market through mid-April.
Cattle
Price action: April live cattle closed down 72 1/2 cents to $163.55. Prices hit a five-week low early on and then closed nearer the session high. May feeder cattle closed down $1.175 at $202.40 and nearer the session high.
Fundamental analysis: The cattle futures markets were pressured today by a keener risk-off mentality in the general marketplace, following the collapse of a major California back that rattled stock and financial markets. Profit taking from recent gains was also featured today after both live and feeder cattle futures markets hit contract highs last week.
More risk aversion in the general marketplace this week, amid the U.S. banking worries, would likely to continue to limit buying interest in the cattle futures markets. The feeder cattle futures market will continue to closely watch corn futures prices, with feeder futures benefitting lately from solid price pressure in corn futures.
The five-area live steer price last week averaged $165.40 compared to $165.02 reported by USDA the week prior. Cash trade may not develop until late this week, and possibly after the monthly USDA Cattle-on-Feed report on this Friday afternoon. That report should contain no surprises and should continue to reflect a tight-supply scenario for the cattle market in the coming months. The noon beef report today showed Choice grade cutout value down 33 cents at $284.58, while Select grade rose $1.45 to $272.99. The Choice-Select spread narrowed to $11.59. Movement at midday was light at 39 loads.
Technical analysis: Live cattle futures’ bulls have the overall near-term technical advantage, but are fading now. A five-month-old uptrend on the daily bar chart has been negated. Live cattle bulls' next upside price objective is to close April futures prices above solid resistance at the contract high of $166.675. The next downside technical objective for the bears is closing prices below solid technical support at $160.00. First resistance is seen at $164.225 and then at Friday’s high of $165.25. First support is seen at today’s low of $162.525 and then at $162.00.
The feeder cattle futures bulls still have the solid overall near-term technical advantage. Prices are in a six-week-old uptrend on the daily bar chart. The next upside price objective for the feeder bulls is to close May futures prices above technical resistance at the contract high of $207.025. The next downside price objective for the bears is to close prices below solid technical support at $196.00. First resistance is seen at today’s high of $203.20 and then at $205.00. First support is seen at today’s low of $201.35 and then at $200.00.
What to do: Get current with advised feed coverage. Be prepared to extend coverage on additional price pressure.
Hedgers: Carry all risk in the cash market for now.
Feed needs: Cover all soymeal needs in the cash market through the end of March. You also extend corn-for-feed coverage another two weeks in the cash market through mid-April.
