Livestock Analysis | March 7, 2022

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Hogs

Price action: April lean hog futures fell 17.5 cents to $100.275, the lowest closing price since Feb. 4.

Fundamental analysis: Lean hog futures saw followthrough pressure after Friday’s limit-down close and technically bearish weekly low close in the April contract. However, today’s close near mid-range suggests bulls may be able to stabilize futures prices early this week. The next CME lean hog index is projected to drop 29 cents to $99.28. The five-day rolling average national direct hog prices was quoted at $92.08 today. Pork carcass cutout values rebounded early today by $4.62 to $108.61, led by gains in hams. Movement at midday was decent at 178.75 loads. Today’s hog slaughter was estimated at 479,000 compared to 451,000 last week and 491,000 one year ago at this time.

A breakdown in live and feeder cattle futures over the past week also weighed on the hog market, prompting long liquidation from speculative funds. Cattle futures stabilized today and will likely have to see additional buying for hogs to do the same. Geopolitics will likely remain on the front burner of the livestock futures markets for the next few weeks. The uncertainty over the Russia/Ukraine war will continue to favor bears amid concerns over disruption to U.S. beef and pork exports to Europe and Asia.

Technical analysis: Lean hog futures bulls have the overall near-term technical advantage but are fading. Recent chart damage and signs of a top in the cash hog market will limit the upside in futures for the near-term. An 11-week-old uptrend on the daily bar chart has been negated. Also, a bearish head-and-shoulders top reversal pattern has formed on the daily bar chart, which is one technical clue a market top is in place. The next upside price objective for bulls is to close April futures above solid resistance at last week’s high of $107.45. The next downside objective for bears is closing prices below solid support at $95.00. First resistance is seen at today’s high of $102.75, then $104.25. First support is seen at today’s low of $98.475, then $97.00.

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.

 

Cattle

Price action: Live cattle and feeder cattle futures posted strong corrective gains. April live cattle firmed $2.125 to $137.90. April feeders strengthened $2.425 to $159.675.

Fundamental analysis: Cattle futures corrected today after nearly two weeks of persistent heavy selling. Funds took a breather from their recent active long liquidation. Whether today’s corrective buying is extended likely depends largely on the corn market. A drop in corn futures after strong overnight gains helped fuel the corrective rebound in feeders. If buyers return to the corn market, the corrective buying in cattle futures will prove short-lived. If not, cattle could extend today’s gains.

Cash cattle averaged $140.61 last week, down $2.61 from the previous week. With April live cattle well below last week’s average cash price, there are limited prospects for higher cash cattle prices this week unless there an extended price recovery in futures. Wholesale beef prices firmed this morning. While there are worries about beef demand given high retail prices and economic concerns, retailers should start buying for post-Lent features, which could allow the market to find a short-term bottom.

Technical analysis: April live cattle filled last Friday’s chart gap at $138.10. The contract needs to close above old support at the January low at $139.025 to signal bottoming action. Above that, resistance would be in the $140.00 area. Last Friday’s low at $133.50 is strong near-term support, followed by the September low t $132.975.

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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