Livestock Analysis | March 1, 2022

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Hogs

Price action: April lean hog futures surged $2.70 to $106.20, the contract’s first gain in five sessions.

Fundamental analysis: Hog futures surged in a corrective bounce from sharp recent declines, supported by firm cash fundamentals. The CME lean hog index extended a climb that’s persisted for over two month, with tomorrow’s benchmark expected to rise 57 cents to $99.66, near a six-month high and $6.54 below April futures.

Pork cutout values fell a third straight day, dropping 97 cents this morning to $111.30 and led by a drop of over $25 in primal bellies. Movement by midday totaled 178 loads. Cutout values are still up $17.58 from $93.72 on Feb. 1, a reflection of stronger demand and tighter supplies and reduced slaughter rates. Hog slaughter so far this week was an estimated 933,000 head, down 17,000 head from the same period last week and down 54,000 head from the same period in 2021.

Technical analysis: Hog futures restored some technical underpinnings after downside momentum slowed yesterday and prices jumped sharply today. The sell-off broke a six-week uptrend and the market may still have more downside, but the reemergence of buyers today may embolden bulls. Initial support is seen at yesterday’s low of $102.875, with further support at the $101.00 January low. Upside objectives for bulls include closing April futures above the 10-day moving average at $106.54 and the contract high of $112.85.

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 futures fell 90 cents to $140.525, the lowest closing price since $140.10 on Jan. 25. April feeder futures fell $2.20 to $159.80, the lowest close since Nov. 1.

Fundamental analysis: Live cattle futures fell to a five-week low as the escalating Russia/Ukraine war and soaring inflation stirred concern over consumer demand for beef. U.S. stocks came under pressure this afternoon, further pressuring cattle futures. Corn futures’ rally above $7.00 weighed on feeder cattle. Last week’s late cash market slippage and indications of more of the same early this week may signal the end of a month-long cash rally.

Slipping fed cattle futures didn’t help the feeder cattle market, but yearling prices suffered direct pressure from soaring grain and soy complex prices, which translate into commensurate increases in feed costs. That will almost surely continue, as long as corn and soybean prices keep climbing.

Technical analysis: Bears hold the upper hand in live cattle, thought the April contract did bounce modestly from today’s low at $140.45, which was a bit above yesterday’s low at $140.25. A drop below those levels and the psychologically important $140.00 level would have bears targeting the Jan. 24 low of $139.03. Penetration of that level would open the contract up to much more substantial losses, possibly down to the $135.00 area. Bulls face resistance at today’s high of $142.34, then at the contract’s 40-day moving average near $143.75. It’s 10- and 20-day moving averages also imply resistance at $144.38 and $145.48, respectively. A push above the latter would have bulls targeting the $147.50 area.

Bears are dominating feeders, with the Oct. 4 low of $157.80, then the November low at $156.15 now in their sights. A drop below those levels might have bears targeting $150.00. Initial resistance was marked by today’s high at $161.95, then at yesterday’s high of $163.975. A push above those levels would open an attempt to fill the chart gap between $167.50 and $167.725 created by the Feb. 24 plunge.

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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