Livestock Analysis | March 3, 2022
Price action: April lean hog futures fell $1.10 to $105.20, leading deferred contracts lower.
Fundamental analysis: Hog futures were pressured by signs of a topping cash market and typical seasonal forces in late winter and early spring. The next CME lean hog index is expected to fall 14 cents, down from a six-month high of $99.84, though the benchmark still trails nearby futures by over $5.00 after rallying since late December. Expectations for slower consumer demand during Lent, which began yesterday, also weighed on the market, as did growing concern over surging inflation.
The probability of a strong resumption of the recent rally in early-to-mid-April remains high. Moreover, after ending the recent wholesale pork cutout decline, buyers apparently bought aggressively and sent carcass values up $6.76 early today $115.18. We expect continued short-term fluctuations in wholesale prices, although those will likely sustain an upward trend later in the month as grocers and processors accelerate buying of hams for Easter features. Cash and wholesale prices likely will trend sideway in the meantime.
Technical analysis: Bulls and bears are still fighting for the short-term technical advantage. Bulls proved able to power an opening above resistance at the contract’s 10-day moving average near $106.75, but they couldn’t sustain that push. The contract’s daily close at $105.20 is within striking distance of the 20-day moving average at $104.67. A drop below the that level would have bears testing last week’s low at $102.875, then the psychological $100.00 level and ultimately the 40-day moving average at $98.19. Conversely, a breakout above the 10-day moving average would open the door to a test of the contract high at $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.
Price action: April live cattle fell $1.75 to $138.35, a four-month low. April feeder cattle fell $2.475 to $160.525, nearer the session low.
Fundamental analysis: Cattle futures fell amid slipping cash market fundamentals and worries about consumer demand for beef amid rising gasoline prices and war. Corn futures extended a rally above $7.00, further pressuring feeders. Light cash cattle trade was reported yesterday at $140 to $141 in the southern Plains, down $2 to $3 from last week. Continued weakness in nearby futures prompted some feedlots to sell, but most were still holding out for steady or firmer prices. Choice grade cutout value at noon today fell 98 cents to an 11-month low of $254.74. Select grade was down $1.90 at $249.44. Movement was 73 loads. Eroding cash sentiment overshadowed signs of stronger foreign demand. Net weekly U.S. beef sales totaled 23,800 MT for 2022, up 64% from the previous week and up 23% from the four-week average.
The mid-February rise in cattle slaughter got feedlots more current, but it may have helped prompt the decline in beef values. Cattle slaughter and beef production generally reach annual lows at this time of year. However, higher retail beef prices are slowing U.S. consumer demand. The Lenten season will also likely delay spring grilling demand.
Technical analysis: Cattle futures bears have the overall near-term technical advantage. Prices are in a steep three-week-old downtrend on the daily bar charts. Today’s move below important chart support at the January low suggests still more downside price action in the near term. Live cattle bulls' next upside price objective is to close April futures prices above solid resistance at $142.00. The next downside technical objective for the bears is closing prices below solid technical support at $135.00. First resistance is seen at $140.00 and then at Wednesday’s high of $141.725. First support is seen at $138.00 and then at $137.00.
In feeder cattle, the next upside objective is to close April futures above resistance at $167.50. The next downside price objective for bears is to close prices below solid support at the November low of $156.15. First resistance is seen at today’s high of $162.775, then at this week’s high of $164.20. First support is seen at $160.00, then at this week’s low of $159.35.
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.
