Livestock Analysis | February 3, 2022

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Hogs

Price action: April lean hog futures fell 75 cents to $98.375, after posting a contract high at $101.25.

Fundamental analysis: Hog futures faded late after strengthening cash fundamentals pushed prices to contract highs for a third straight day. Deferred futures also set contract highs on prospects for reduced hog supplies and substitution demand for pork this spring. Short-term, the hog price outlook appears less bullish, especially after the wholesale market gave back the bulk of yesterday’s early gains and fell $1.89 to $92.50 early today. The CME lean hog index is expected to rise 4 cents to $83.33 tomorrow, but gains of late have slowed dramatically from those late last week and early this week. February futures’ weakness today reflected traders taking premium out of the market as expiration nears.

Concerns about seasonal weakness traditionally extending from mid-February to early April may have played a role in today’s futures setback. Still, we remain optimistic about spring-summer prospects, since 2021 prices were substantially higher despite supplies significantly larger than those forecast for the next few months.

Technical analysis: April hog futures posted a fresh contract high at $101.25 today, but bulls couldn’t sustain the advance. This weakens the bulls’ short-term technical advantage. Initial resistance is pegged at Tuesday’s high of $99.15, with significant backing at the $100.00 level, then at today’s high. A breakout above that level would have bulls targeting $104.00 on the continuation charts. Look for initial support around the 10-day moving average at $96.45, then at last week’s low of $93.625. A drop below that level would have bears targeting support at the 40-day moving average near $89.05.

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 fell 15 cents to $146.75, after posting a contract high at $147.275. The contract is still up from $143.10 at the end of last week. February live cattle rose 47.5 cents to $141.60, the highest close for a nearby contract since March 2016. March feeder cattle fell 15 cents to $166.725.

Fundamental analysis: Live cattle fell for the first time in five sessions amid slumping wholesale beef prices and corrective pressure following the rally to contract highs. Cash cattle strengthened this week as meatpackers stepped up slaughter rates, but continued weakness in boxed beef indicates packers are cutting prices in an effort to attract retail buyers. Choice cutout values fell another $1.09 early today to $282.06, a three-week low. Movement by midday totaled 76 loads. Cash trade around $140.00 was reported in the Southern Plains this morning before bids dropped to $139.00, indicating packers had covered their needs for this week. USDA yesterday reported live steers at an average of $139.96, up about $3.00 from last week’s average. Slaughter so far this week was an estimated 479,000 head, up 10,000 head from the same period last week and up 9,000 head from a year ago.

USDA reported net weekly U.S. beef export sales of 20,100 MT for 2022, up from 14,300 MT the previous week. Lead buyers included Japan (11,800 MT, including decreases of 600 MT), South Korea (3,500 MT, including decreases of 800 MT) and Taiwan (1,600 MT, including decreases of 100 MT).

Technical analysis: Market bulls retain an upper hand in live cattle with prices in a steep uptrend and trading above major moving averages. Initial resistance is marked at today’s April contract high of $147.275. A push above that price may have bulls targeting a close above further resistance at $150.00. Initial support is placed at yesterday’s low of $145.475. Downside objectives for bears includes closing April futures below support at $142.00.

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.

 

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