Livestock Analysis | May 5, 2022
Price action: June lean hog futures rose $1.975 to $107.075, the contract’s highest closing price since April 28. July through December futures also jumped sharply.
Fundamental analysis: Lean hog futures extended Wednesday’s rebound amid ideas the market has established a short-term bottom and is heading into a period of seasonal strength based on grilling demand. Wholesale pork movement has been relatively light over the past week, but a price jump this morning may have encouraged further corrective buying in futures. Pork cutout values rose $4.28 early today to $108.11 behind gains of over $5 in hams and ribs. Movement by midday was about 135 loads.
Cash fundamentals continued to slip and weekly USDA export numbers underscored recent concern over softer export demand with the U.S. dollar index surging to two-decade highs. The CME lean hog index fell 11 cents today (as of May 3) to $101.04, the sixth straight daily decline and a two-week low. Also today, USDA reported net weekly pork sales totaled 23,800 MT for 2022, down 24% from the previous week and down 13% from the prior four-week average.
Technical analysis: Hog market bears retain the near-term technical advantage, but price strength the past two sessions has fostered beliefs the market has established a near-term bottom. A bearish head-and-shoulders top reversal pattern has largely played out on the June futures daily bar chart. June futures closed above one key upside target, $105.00, and market bulls may now be targeting the 10-day moving average of $109.10 and $110.00. Downside objectives for bears includes a 3 1/2-month low of $101.875 reached earlier this week and solid support at $100.00.
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.
Price action: June live cattle fell $1.05 to $133.775, the contract’s lowest settlement since a seven-week closing low posted April 29. August feeder cattle fell $1.825 to $174.375.
Fundamental analysis: Live cattle fell for a second session amid a lack of strength in the cash market and concerns high prices are curbing domestic beef demand. Packer margins have shrunk to two-month lows as they cut beef prices to move product. Choice cutout values tumbled $2.91 early today to $256.83, the lowest daily average since mid-March, though movement by midday was strong at 114 loads. Retailers are still stocking up for the summer grilling season, which may limit futures downside over the near-term, but higher-than-expected feedlot inventories and placements in recent months signal greater animal supplies longer-term.
Live steers in five top feedlot areas averaged $143.34 this week through Wednesday, steady with last week’s average, according to USDA data. Many feedlots were still holding out for firmer prices, especially in the northern market where supplies are tighter. Earlier today, USDA reported net weekly U.S. beef sales totaling 14,600 MT for 2022, up 28% from the previous week and up 1% from the prior four-week average.
Technical analysis: Bears still hold the technical advantage in nearby live cattle, with June futures still trading under the 10-day moving average, at about $135.10, and also under longer-term moving averages. A $1.50 downside gap created after an unexpectedly bearish Cattle on Feed report in late April isn’t close to being filled, and bears are likely targeting a close below last week’s June futures low at $132.50. A drop under last week’s low would put the March low at $130.975 in bears’ sights.
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.
