Livestock Analysis | March 29, 2022
Price action: June lean hogs closed down $1.425 at $124.625 and nearer the session high. April lean hogs fell $1.525 at $106.05.
Fundamental analysis: The lean hog futures market fell victim to a selloff in much of the raw commodity sector, led by Nymex crude oil that at one point today traded as low as $98.44 a barrel. Profit-taking from recent strong gains and ahead of Wednesday’s USDA Hogs & Pigs Report was also featured in hog futures today. That report is expected to show the U.S. hog herd contracted 1.2% from year-ago as of March 1. Based on the average pre-report estimate, the March 1 hog herd is expected to total just over 73 million head, including a market hog inventory of 66.8 million head (down 1.3%) and breeding herd of 6.2 million head (up 0.1%).
A solid rally in cattle futures today that saw fats and feeders hit four-week highs limited selling interest in hog futures, and may also prompt hog market bulls to jump back on the buy side as soon as Wednesday.
The pork cutout value at noon today rose $2.19 at $109.60, led by gains in bellies. Movement was decent at 168.79 loads. The national direct five-day rolling average cash hog price is quoted today at $105.59. The CME lean hog index was up 68 cents to $102.93 is projected up 63 cents at $103.56 for Wednesday (as of March 28). April hog futures ended nearly $2.50 above tomorrow’s cash index.
Technical analysis: Lean hog futures bulls have the solid overall near-term technical advantage. Prices are in a three-week-old uptrend on the daily bar chart. The next upside price objective for bulls is to close June futures above solid chart resistance at $130.00. The next downside price objective for bears is closing prices below solid technical support at $120.00. First resistance is seen at the contract high of $126.875 and then at $128.00. First support is seen at $124.00 and then at $122.45.
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: After declining in response to the Cattle on Feed Report Monday, cattle futures bounced back today. The nearby April live cattle contract rallied 60 cents to $140.90, while most-active June surged $1.70 to $138.475. May feeder futures leapt $4.325 to $169.40.
Fundamental analysis: The strong marketings figure in last Friday’s USDA Cattle on Feed Report likely limited the price damage done by the bearishly construed placements and feedlot population totals indicated by the report. The comparatively large slaughter totals posted the past two weeks probably encouraged bulls as well, since those suggest producers are cognizant of the need to keep cattle moving out of feedlots and into the marketing chain. Having wholesale beef prices resume their March advance late last week also seemed quite supportive, as did the fact that last week’s cash trading was essentially flat after looking set to fall significantly at midweek. Choice beef cutout rose another 87 cents to $264.74 at noon today.
Today’s cattle advance was clearly led by feeder cattle futures, which in turn marked a strong response to big losses in the wheat, corn and soybean complexes. Those reflected fresh hopes for a peaceful, short-term resolution to the Russia/Ukraine conflict. Continued strength in the equity markets, as well as today’s big drop in the value of the U.S. dollar probably spurred cattle buying as well. Indeed, the quick futures rebound from yesterday’s losses, the relative size of the June advance, as well as the fed cattle market’s tendency for early spring strength, may be boosting industry ideas about the results of this week’s cash trading.
Technical analysis: Bearish traders proved unable to mount a serious challenge of technical support at the June contract’s 20-day moving average near $135.57 yesterday and ultimately had to watch as it closed above the 10-day moving average at $136.61 after having fallen below that level early in the session. Moreover, today’s strong advance carried the contract price above its 40-day moving average near $138.19 for the first time since Feb. 25, which gives bulls the short-term technical advantage. Support persists at those moving averages, but a drop below those levels would have bears targeting the March 23 low at $134.075, the March 10 low at $132.15, then the March 4 low at $130.975. Today’s move opened the door to a test of resistance at the $140.00 level, then at the Feb. 10 high of $143.35.
Bulls also seem to hold the short-term technical advantage in May feeder futures despite bulls’ inability to force a close above the contract’s 40-day moving average at $169.94 today. A fresh close above that level would have bulls targeting the Feb. 25 high at $173.30, then the Feb. 16 high at $177.70. Look for initial support at the March 16 high at $169.25, then at today’s low of $166.675. A drop below that level, as well as the 10- and 20-day moving averages at $166.40 and $165.87, respectively, would open the door to a test of the March 23 low at $163.075, then the psychological $160.00 level.
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.
