Livestock Analysis | April 26, 2022
Advice: We advise livestock producers to cover all soybean meal needs in the cash market through the end of May. Be prepared to extend coverage on further price weakness.
Price action: June lean hog futures fell $2.85 to $111.175, the contract’s lowest settlement since $111.00 on March 7.
Fundamental analysis: Technical selling pressure was featured in the hog futures today as a big and bearish head-and-shoulders top formation plays out on the daily bar chart, suggesting still more downside price pressure in the near term. Continued U.S. dollar strength also weighed on hog futures, fueling concern over weaker export demand.
Wholesale pork prices continued slipping, with cutout values down 21 cents early today to $105.58, the lowest since early April. Bellies again led the declines. Movement by midday was decent at 179 loads. The five-day rolling average national direct cash hog price today was quoted at $100.30. The CME lean hog index today was up another 83 cents at $102.50, the highest since March 31. The cash index posting on Wednesday is projected at $102.89, up 39 cents.
Technical analysis: Lean hog futures bulls have lost the near-term technical advantage as a bearish head-and-shoulders top pattern is playing out on the daily chart. The next upside objective for hog bulls is closing June futures above solid resistance at this week’s high of $117.90. The next downside price objective for bears is closing June below solid support at the March low of $109.15. First resistance is seen at $112.20, then $113.00. First support is seen at $110.00, then $109.15.
What to do: Cover all soybean meal needs in the cash market through May. Be prepared to extend coverage on further price weakness. You are hand-to-mouth on corn-for-feed needs.
Hedgers: Carry all risk in the cash market for now.
Feed needs: NEW ADVICE -- Cover all soybean meal needs in the cash market through May. Be prepared to extend coverage on further price weakness. You are hand-to-mouth on corn-for-feed needs.
Advice: We advise livestock producers to cover all soybean meal needs in the cash market through the end of May. Be prepared to extend coverage on further price weakness.
Price action: April live cattle rose 90 cents to $140.00 and most-active June rose 82.5 cents to $136.25. May feeder futures fell 57.5 cents to $160.725.
Fundamental analysis: Live cattle futures posted a modest rebound from Monday’s sharp losses, which were driven by bearish USDA feedlot and cold storage numbers. Futures’ weakness weighed on the cash market, with initial trade indicating prices $2 to $3 lower than last week’s average of $143.02. Choice grade beef fell another 98 cents early today to $265.62. Considering weakness in cash fundamentals, today’s futures bounce was rather impressive. April futures’ bounce put the contract, which expires Friday, back on par with the likely average for cash trading this week. Continued corn market strength pressured feeder futures.
Monthly retail buying patterns suggests grocers will not pursue beef very aggressively this week, which may render the cattle/beef complex vulnerable to further short-term weakness. Conversely, grocers are likely to become much more active buyers next week as they start gathering beef inventories for the Memorial Day holiday and first-of-the-month features in the first weekend in June. Cattle futures may trend generally weak during the days ahead then turn higher in early May.
Technical analysis: Bears hold the technical advantage in cattle futures, especially with the June contract failing at psychological resistance around $140.00 late last week and beginning this week by gapping lower. Look for strong resistance between yesterday’s high of $136.85 and the top of the chart gap at last Friday’s low of $138.35. A breakout above that level would have bulls targeting the $140.00 level, then the Feb. high at $143.35. Today’s bounce flipped the 40-day moving average to initial support near $135.90, with backing at today’s low of $135.50, then yesterday’s low of $134.45. A breakdown from that point would have bears targeting the April low of $132.475, then the March bottom at $130.975.
What to do: Cover all soybean meal needs in the cash market through May. Be prepared to extend coverage on further price weakness. You are hand-to-mouth on corn-for-feed needs.
Hedgers: Carry all risk in the cash market for now.
Feed needs: NEW ADVICE -- Cover all soybean meal needs in the cash market through May. Be prepared to extend coverage on further price weakness. You are hand-to-mouth on corn-for-feed needs.
