Livestock Analysis | March 24, 2022

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Hogs

Price action: April lean hog futures rose 22.5 cents to $102.775, while June futures fell 90 cents to $122.075.

Fundamental analysis: Deferred hog futures appeared to overdo yesterday’s surge to contract highs, and that session’s late pullback set the tone for today’s weakness. The preliminary figure for the next CME Lean Hog Index reversed a recent dip, rising 29 cents to $101.50, but that still leaves nearby April futures at a significant premium. Ultimately, the hog industry seems to have hit a lull between active grocery ham buying in late February and early March and the usual spring buying surge of grilling cuts. It’s common for one wave to immediately follow the other, but the late arrival of Easter on April 17 seems to have bifurcated the spring season. We should expect grilling season demand to accelerate in early April, which suggests another week of flat-to-lower cash and wholesale action, although pork cutout did climb $2.23 to $108.62 early today. Late-season ham buying apparently powered the move.

We suspect hog industry insiders and traders expect high retail beef and pork prices to limit consumer buying, tempering the typical grilling season surge. This week’s setback in cash cattle prices and summer hog contracts’ inability to sustain pushes above last year’s cash index peak at $122.68 reinforce that view. Some observers believe USDA underestimated the fall pig crop and overestimated the implied 4.0% decline in spring hog supplies. But recent slaughter totals are consistent with those numbers. The supply situation will be clarified in USDA’s quarterly Hogs and Pigs Report March 30.

Technical analysis: The short-term outlook still favors bulls in June hog futures. Although June pulled back from yesterday’s contract high, sellers had little success extending the decline today, as June futures posted a mid-range close. Today’s drop partially filled the $120.225 to $121.20 chart gap created by yesterday’s strong opening.

Look for initial support to extend from today’s low at $120.675 down to the 10-day moving average at $119.62. Additional support is likely to emerge at the contract’s 20- and 40-day moving averages at $116.97 and $114.64, respectively. A drop below the latter level would have bears targeting the March low at $109.15. Initial resistance is likely to emerge at today’s opening of $122.975, then at yesterday’s contract high of $124.45. A move to fresh highs would probably face psychological resistance at $125.00, then at the spring 2014 high of $128.75.

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 97.5 cents to $136.95 and nearer the session high. April live cattle rose 25 cents to $139.675. May feeder cattle rose 70 cents to $166.50 and near mid-range.

Fundamental analysis: Cattle futures showed renewed strength despite a weaker than expected cash market, supported by strong weekly U.S. beef export sales. Feeder cattle were supported by weaker corn prices. Cash cattle trade yesterday was reported at $137 to $138 in the Southern Plains, down $1 to $2 from last week’s live steer average. Choice grade cutout values early today rose $1.45 to $263.05, a four-week high. Select grade fell 77 cents. Movement by midday was 63 loads. Seasonals suggest the boxed beef market will continue to show strength into mid-May.

Early today, USDA reported net weekly U.S. beef sales at 27,500 MT for 2022, a marketing-year high and up 29% from the average for the previous four weeks. Exports totaled 41,800 MT, also a marketing-year high. Traders await Friday’s USDA monthly Cattle on Feed Report, which is expected to show record March 1 inventories and a year-over-year increase of about 6.1% in February placements, based on a Reuters survey. Marketings are expected up around 4.0% from February 2021.

Technical analysis: Live and feeder cattle futures bulls and bears are on level near-term technical playing fields amid recent choppy trading. Live cattle bulls' next upside objective is to close June futures prices above solid resistance at $140.00. The next downside objective for bears is closing prices below solid support at the March low of $130.975. First resistance is seen at this week’s high of $137.75, then $139.00. First support is seen at $135.00, then at this week’s low of $134.075.

In feeder cattle, the next upside objective for bulls is to close May futures prices above resistance at $170.00. The next downside price objective for bears is to close prices below solid support at the March low of $159.25. First resistance is seen at today’s high of $167.725, then at last week’s high of $169.25. First support is seen at $165.00, then at $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.

 

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