Livestock Analysis | April 20, 2022
Price action: June lean hog futures fell $2.575 to $118.75.
Fundamental analysis: Hog futures fell sharply for the second straight day as technicals slipped further and weakness in wholesale pork stirred concern over demand. Pork cutout values jumped early yesterday before ending the day down $2.37 at $107.12, driving market skepticism that today’s early strength would be sustained. Early today, cutout values gained $2.82 to $109.94, but packers have often encountered retailer resistance to prices around or above $110.00
The CME lean hog index continued to climb but the pace of the advance is weakening. The preliminary figure for tomorrow index is 43 cents to $100.93, which would mark the sixth consecutive daily increase. Ultimately, neither the cash hog nor wholesale pork markets are exhibiting the kind of strength seasonal patterns suggest should be emerging at this time. Thus, while a big spring advance is surely looming, the markets are offering little evidence of that sort of strength at this time.
Technical analysis: Although bulls still hold a technical advantage, today’s declines carried June hog futures back under the 20-day moving average near $119.66. That now represents initial resistance, with backing at today’s high of $121.075, then at yesterday’s high of $123.075. A breakout above that level would have bulls targeting the contract high at $127.325. Look for solid support between the contract’s 40- and 10-day moving averages near $118.05 and $117.57, respectively. A drop below that area would have bears targeting the April 12 low of $115.50, then the April 5 low at $112.20.
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: June live cattle rose $2.05 to $138.625, the contract’s highest closing price since Feb. 23. May feeder cattle rose $1.70 to $162.475 and August feeders rose $2.025 at $173.475.
Fundamental analysis: Live cattle closed near a two-month high behind strength in the cash market. Some light cash trade in the $140 to $141 range was reported in the Southern Plains yesterday, up $1 to $2 from that region’s prices last week. Trade today was reported at $2 to $4 higher in the northern dressed market, the equivalent of a $1 to $2 increase on a live basis. Wholesale beef prices continued to weaken a mid-week, with Choice grade cutout values early today down another 34 cents at $269.59, the lowest since early April. Movement at noon was decent at 97 loads.
Traders will closely examine tomorrow’s weekly USDA export sales report, with bulls hoping for further improvement in U.S. beef sales that began with last week’s numbers. Also in focus is Friday’s USDA Cattle on Feed Report, which is expected to show a 7.8% year-over-year drop in March feedlot placements. March marketings are seen down 1.8% from last year. Good premiums at present in deferred live cattle futures offer solid returns to producers if they can keep their feed costs under control.
Feeder cattle futures bulls have stabilized, suggesting a price floor is in place. However, feeder futures will continue to be susceptible to a further rally in corn prices, ended near 10-year highs today.
Technical analysis: Live cattle bulls regained a near-term technical advantage. Bulls' next upside objective is closing June futures above solid resistance at $141.00. The next downside objective for bears is closing prices below solid support at the April low of $132.475. First resistance is seen at $139.00, then $140.00. First support is seen at $137.50, then at today’s low of $136.85.
Feeder cattle bears still have a near-term technical advantage. The next upside objective is closing August futures above resistance at $178.00. The next downside objective is closing prices below solid support at the April low of $170.15. First resistance is seen at today’s high of $173.975, then at $175.00. First support is seen at $172.50, then at today’s low of $171.45.
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.
