Livestock Analysis | February 10, 2022
Price action: April lean hog futures fell $1.375 to $103.425 after earlier reaching a contract high at $107.70. February futures fell 5 cents to $90.175.
Fundamental analysis: Hog futures joined a broad commodity setback in the wake of widespread gains earlier in the week. Bulls may have had second thoughts about the sizeable premiums recently built into the spring and summer contracts despite ongoing support from the cash and wholesale markets. The next CME lean hog index is expected to gain 52 cents to $87.74, the highest since mid-October.
Wholesale pork prices fell early today but remain near four-month highs. Pork carcass cutout values fell $3.11 this morning to an average of $101.73. Slaughter so far this week totaled 1.898 million head, up 5.3% from the same period last week and down 2.8% from the same period last year. The kill numbers suggest hog supplies are not falling as far short as recently seemed to be the case. Expectations of a larger kill total may also have spooked hog market bulls today. Given the cash hog market’s history of flat-to-lower price action from mid-February to early April, a short-term setback by the hog and pork complex wouldn’t be surprising.
Technical analysis: Bulls still hold a short-term technical advantage, although today’s “outside day” price action resembled a key reversal. Look for major resistance at today’s high of $107.70, but a bullish reversal and break-out above that point would have bulls looking to quickly test the $110.00 level. Today’s low at $103.175 looks like initial support, but a drop below that point would have bears targeting the $100 level and below.
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.
Price action: April live cattle fell 95 cents to $146.875 after rising earlier to a contract high at $148.70, while nearby February futures fell 55 cents to $142.35. March feeder cattle fell $1.55 to $166.275.
Fundamental analysis: Cattle futures tumbled from contract highs amid a broad commodity sell-off driven by profit-taking and long liquidation. Futures rose earlier on technical strength, firmer cash and signs of improved beef demand. Meatpackers continue to step up slaughter rates and were reportedly bidding around $140.00 for cattle in some Plains markets at mid-week. Live steers averaged $140.07 through yesterday morning, up from last week’s average of $139.76, according to USDA reports.
Wholesale beef extended a recent slump as packers cut prices to encourage retail demand. Choice cutout values fell 68 cents early today to $275.11, the lowest daily average since Jan. 7. Movement by midday totaled 97 loads. USDA reported net U.S. beef sales for the week ended Feb. 3 at 19,500 MT for 2022, down 3.1% from the previous week and down 63% from the average for the previous four weeks.
Technical analysis: Live cattle’s weak close today may encourage bears and lead to followthrough selling tomorrow, though the market remains in a steep uptrend since late January. Initial resistance in April live cattle is seen at the $148.70 contract high, with support at the 10-day moving average around $148.10 and this week’s low at $145.225. Upside objectives for bull include closing April futures above solid resistance at $150.00. Downside objectives for bears include closing April below solid support at $143.00.
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.
