Livestock Analysis | April 27, 2022
Fundamental analysis: June lean hogs fell for the third consecutive day and ended near three-month lows on eroding technicals and concerns over demand. An expected downtick in the CME lean hog index contributed to futures weakness. The preliminary quote for tomorrow’s index is down 55 cents to $102.34, signaling a possible reversal from a four-week high. The contra-seasonal nature of the latest decline probably spurred selling since it’s common for hog prices to gain this time of year. Bulls can point to today’s big rebound in pork cutout values, which jumped $3.68 to $109.23. However, the futures market doesn’t trust big morning moves in wholesale pork prices, since they’re often reduced or reversed in afternoon trading.
Weak demand continued to weigh on the hog market. Domestic demand is being crimped by elevated beef and pork prices, which may prompt some consumers to switch to cheaper chicken. Pork export demand this spring likely will fall well short of year-ago levels, in part due to China scaling back purchases after recovering from an African swine fever outbreak. Nevertheless, seasonally reduced hog supplies will be meeting improving grilling demand for most pork cuts in the coming weeks, so a bullish reversal in hog futures can’t be ruled out.
Technical analysis: Bears enjoy the short-term technical advantage at this point, particularly after the June hog contract posted a low-range close today. Today’s low at $109.975 marked the strength of psychological support in the $110.00 area, but a close below that level would have bears targeting the March 7 low of $109.15, then the January 28 low at $104.25. Initial resistance will likely emerge at Tuesday’s low of $110.60, then at Monday’s low of $114.025. A push above that level would have bulls facing stiff resistance near the confluence of the contract’s 10-, 20- and 40-day moving averages near $116.98, $117.13 and $117.86, respectively. Bulls would be targeting the April 19 high at $123.075 if they could force a breakout above the short-term moving averages.
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: You have all soybean meal needs covered in the cash market through May. Be prepared to extend coverage on price weakness. You are hand-to-mouth on corn-for-feed needs.
Price action: June live cattle fell $1.225 to $135.025, the lowest closing price since April 11. August feeder cattle fell $4.20 at $168.95, near a six-month low.
Fundamental analysis: Live cattle futures settled at the lowest prices in over two weeks amid expectations for weaker cash and concern high beef prices are curbing demand. Weakness in feeder cattle also pressured live cattle. Nearby corn futures extended a rally above $8.00 and ended near a 10-year high. Bulls are hoping warmer temperatures in coming weeks will entice consumers to fire up their grills and boost beef demand.
Moderate to active cash cattle trade occurred earlier this week at steady to weaker prices compared with the $143.02 live steer average last week. It has been a big week of cash trade volume, so there is likely just cleanup left this week. Choice beef cutout values fell another $1.59 early today to $262.58, a four-week low. Select grade was down $3.07. Movement at midday was 93 loads.
Technical analysis: Live cattle futures bears have a near-term advantage as the market’s technical posture deteriorated, suggests more selling pressure ahead. Live cattle bulls' next upside objective is closing June futures above solid resistance at $138.35, the top of this week’s big downside price gap on the daily bar chart. The next downside objective for bears is closing prices below solid support at the April low of $132.475. First resistance is seen at this week’s high of $136.85, then $138.35. First support is seen at this week’s low of $134.45, then $134.00.
The next upside objective for feeder bulls is closing August futures above resistance at $178.225. The next downside objective for bears is closing prices below solid support at the contract low of $166.075. First resistance is seen at $170.00, then $171.00. First support is seen at $168.00, then $167.00.
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: You have all soybean meal needs covered in the cash market through May. Be prepared to extend coverage on price weakness. You are hand-to-mouth on corn-for-feed needs.
