Livestock Analysis | April 4, 2022
Price action: June lean hogs plunged $4.30 to $116.15, the lowest closing price since March 18. April futures fell $1.85 to $99.45.
Fundamental analysis: Followthrough technical selling pressure and eroding cash fundamentals weighed on futures. The CME lean hog index fell 50 cents (as of March 31) to $102.63. Tomorrow’s index is projected down another 22 cents at $102.41. Hog bulls are getting no traction from April futures’ ongoing discount to the cash index, and the market brushed aside a morning jump in pork cutout values, which rose $8.23 to $111.83, led by a $34 gain in bellies. Movement was decent at 170 loads. Today’s five-day rolling average national direction cash hog price was quoted at $103.83.
Last week’s bullish USDA Hogs & Pigs Report may keep a floor under cash and futures prices. Seasonally, warming temperatures should also stimulate consumer demand for pork as the grilling season approaches.
Technical analysis: Lean hogs took further chart damage, and while market bulls have recently stepped in to buy on big downside price breaks, bulls must show significant power soon; otherwise, technical signals suggest the market has put in a near-term price peak. The next upside objective for bulls is to close June futures above solid resistance at the contract high of $127.325. The next downside objective for bears is closing prices below solid support at the March low of $109.15. First resistance is seen at $118.00, then $119.00. First support is seen at $115.00, then $114.00.
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.
Price action: Live cattle finished in the middle portions of today’s ranges. April live cattle dropped 65 cents to $138.00, while June cattle fell 92 1/2 cents to $134.925. Feeder cattle finished near session lows. April feeders fell $3.20 to $158.375, while May feeders plunged $3.65 to $162.475.
Fundamental analysis: Feeder cattle were tripped up by a combination of spillover from strength in the corn market and technical-based selling. Traders also narrowed premiums futures held to the CME feeder cattle index.
Live cattle traded both sides of unchanged early but couldn’t find sustained buying amid the heavy spillover from feeder cattle and lean hogs. April feeder cattle extended the discount to the cash cattle market, which last week averaged $139.32, up 37 cents from the previous week. Traders are generally anticipating steady cash cattle prices this week, though expectations could decline if futures extend recent price declines.
Retailer demand for beef should start to ramp up as they prepare for post-Lent and early grilling season features. But that wasn’t the case this morning, with only 31 loads changing hands amid gains in Choice beef and weaker prices for Select. If movement doesn’t increase soon, it could indicate retailers aren’t going to actively feature beef this spring.
Technical analysis: June live cattle closed below the 200-day moving average for the first time since March 11. Near-term support extends from today’s low at $133.875 to the March low at $130.975. Near-term resistance extends from the 10-day average near $136.725 to last week’s high at $138.525.
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.
