Livestock Analysis | March 17, 2022
Price action: Hog futures turned sharply lower, with the April contract falling $2.025 to $100.35, the lowest closing price since March 10.
Fundamental analysis: Pork cutout values broke their recent pattern of rising in the morning and setting back in the afternoon by posting a $1.84 loss to $103.18 at midday. The weakness may have sparked selling in hog futures, despite a modest rebound in the preliminary CME index quote, which is up 36 cents to $100.77, above the April futures close.
Futures’ weakness may reflect concern a potential recession combined with high retail prices may curb spring grilling demand. But fears of recession stifling red meat demand appear overdone, since history shows that has seldom proven true. We believe consumers are more likely to avoid restaurants and eat more at home and are more concerned about grocers boosting prices for high-end meat cuts to the point that consumers stop buying. Ultimately, seasonal patterns suggest the current weakness will prove temporary, with market direction likely to reverse as Easter and the spring grilling season near.
Technical analysis: Bears own the short-term technical advantage after forcing April futures below 40-day moving average support near $101.70, which now marks initial resistance. Additional resistance is marked by the 20-day moving average near $104.15, with backing from the March 3 high of $107.45. A push above that level would have bulls targeting the contract high at $112.85. Initial support stems from today’s low at $99.88, with backing from the March 7 low at $98.48. A drop below that level would open the door to a test of the February low at $93.63.
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: June live cattle rose 40 cents to $135.925 and nearer the session high. May feeder cattle fell $1.40 to $165.875.
Fundamental analysis: Live cattle futures were supported by beliefs cash cattle prices will firm this week after two weeks of declines, while feeder futures were pressured by solid gains in corn futures prices. Cash cattle trade so far this week has been light. Moderate trade around $138 has been seen in the Southern Plains, around steady with a week ago. Some feedlots are holding out for higher prices. Strength in wholesale beef market had been supporting cattle futures. However, Choice grade beef cutout value early today fell 49 cents to $257.59. Select grade rose 51 cents. Movement at midday was 85 loads. Slaughter so far this week totaled 500,000 head, up 1,000 head from the same period last week and up 44,000 from the same period in 2021.
Early today, USDA reported net weekly U.S. beef sales of 19,700 MT for 2022, down 28% from the previous week and down 11% from the prior four-week average. USDA projects 2022 exports will decline 4.3% from a year ago.
Technical analysis: Live cattle bears have a near-term technical advantage. However, it still appears a near-term market low is in place after the strong rebound from the March low. Bulls' next upside objective is to close June futures above solid resistance at $140.00. The next downside objective for the bears is closing prices below solid support at the March low of $130.975. First resistance is seen at today’s high of $136.475 and then at this week’s high of $137.60. First support is seen at today’s low of $134.75 and then at $134.00.
Feeder cattle bears also have a near-term technical advantage, but it looks like a market bottom is in place. The next upside price objective for closing May futures prices above resistance at $173.00. The next downside objective for bears is to close prices below solid support at the March low of $159.25. First resistance is seen at $167.50, then this week’s high of $169.25. First support is seen at $165.00, then $164.00.
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.
