Livestock Analysis | March 9, 2022
Price action: April lean hog futures fell $1.775 to $101.15.
Fundamental analysis: Despite signs of firmness in the cash hog and wholesale pork markets, nearby hog futures gave back a substantial portion of yesterday’s gains. The CME lean hog index fell 28 cents to $99.00, the fourth straight daily decline, but the next quote is expected to rise 26 cents. Pork cutout values rose 79 cents early today to $106.19.
The big futures drop may have had little to do with hog/pork complex fundamentals, since most ag, energy and metal markets took major losses. The equity markets rebounded strongly and the U.S. dollar dove, which might easily have offered considerable support for commodity values based upon the potential for improved domestic and export demand, respectively. Still, from a seasonal standpoint, the short-term hog and pork outlook is less than promising, since the hog/pork complex often struggles during March and early April. However, early spring will almost surely bring much improved demand as grilling season gets underway, as well as the traditional seasonal decline in hog supplies into early summer. That routinely drives the cash market to annual highs in late spring or early summer.
Technical analysis: Bears seem to have a slight short-term technical advantage at this point, especially after bulls in April futures proved unable to mount a serious challenge of the contract’s 10-day moving average near $103.53, much less the 20-day moving average at $104.73 or last Friday’s chart gap between $104.25 and $105.05. A breakout above that chart gap would have bulls targeting the March 3 high at $107.45, then the contract high at $112.85. Conversely, bears couldn’t force a test of solid support at the contract’s 40-day moving average of $99.56. A drop below that level would open the door to a test of the Jan. 28 low of $93.63, then the Jan. 11 low at $83.60.
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 $1.475 to $137.575. April feeder cattle fell 17.5 cents to $160.15.
Fundamental analysis: Cattle futures fell despite a rally in the U.S. stock market, as weaker cash cattle trade this week and high beef prices at the meat counter continued to weigh on prices. Crude oil futures plunged, weighing on other commodity markets. The Lent season may continue to pinch consumer demand for beef in the near term. Sharply lower corn futures helped limit the downside in feeder cattle. Feeder futures are likely to continue to look to the corn market for daily price direction.
Cash cattle trade around $138 was reported in the Southern Plains earlier this week and $222 in the northern dressed market, down more than $2 from last week. Choice cutout values early today rose 35 cents to $252.79, while Select dipped 46 cents. Movement at midday was decent at 104 loads. Traders will closely examine tomorrow’s weekly USDA export sales report for a gauge on global demand for U.S. beef amid the Russia-Ukraine war.
The next upside price objective for feeder bulls is to close April futures prices above resistance at $167.50. The next downside objective for bears is to close prices below solid support at the March low of $154.275. First resistance is seen at this week’s high of $162.25, then at $164.20. First support is seen at yesterday’s low of $159.40, then at $157.50.
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.
