Livestock Analysis | May 9, 2022
Price action: June lean hogs fell $2.80 to $101.30, near a four-month closing low. Other contracts also posted sharp losses.
Fundamental analysis: Hog futures extended the steep selloff of the previous two weeks on bearish technicals and ongoing weak cash market fundamentals. Livestock futures were also pressured by a broad commodity market liquidation led by sharp declines in crude oil. Weakness in U.S. stocks and the surge in the U.S. dollar index to a 20-year high again today also weighed on livestock. Bulls are still holding out hope that seasonal patterns, including grilling season, and lower hog marketings this summer will soon come to the rescue of the eroding hog futures market.
Today’s CME lean hog index fell 5 cents to $100.91, the eighth consecutive decline and a three-week low. The index for Tuesday (as of May 6) is projected up 18 cents at 101.09. The five-day rolling average national direct cash hog price today was quoted at $102.35. Pork cutout values early today fell 16 cents to $104.54 as picnics and hams led the declines. Movement by midday was decent at 166.65 loads.
Technical analysis: Hog futures bears hold a firm near-term technical advantage and gained fresh power today. Bearish speculators are confident there is more price downside in the near term and will likely be pressing their case in coming days. June futures are in a five-week-old downtrend on the daily bar chart. The next upside price objective for hog bulls is to close June prices above solid chart resistance at last week’s high of $107.525. The next downside price objective for bears is closing prices below solid technical support at $95.00. First resistance is seen at today’s high of $103.35 and then at $105.00 First support is seen at $100.00 and then at $99.00.
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 firmed 80 cents to $133.55 after dropping to a three-month low earlier while most other contracts finished with slight losses. May feeder cattle firmed 25 cents to $159.80. Deferred contracts ended lower, with August feeders down 47 1/2 cents to $174.225.
Fundamental analysis: Cattle futures faced heavy pressure from outside markets as the commodity sector and U.S. stocks sold off aggressively. Given the outside market pressure, today’s performance in the cattle market was rather impressive. With that said, bulls still have a lot of work to do after recent, heavy price pressure.
Cash cattle averaged $143.42 last week, up 8 cents from the previous week. Feedlots will be seeking higher prices again this week, though traders haven’t formulated strong cash cattle opinions. Recent cash strength will face stronger headwinds in the weeks ahead as market-ready supplies build. Plus, packers have bought a lot of cattle for deferred delivery in recent weeks, reducing their need to buy spot delivery supplies.
Choice boxed beef prices firmed $4.57 this morning, while Select fell 81 cents. But movement was solid at 71 loads, despite the strong gains in Choice boxes. That could be an indication retailers are securing supplies ahead of upcoming features for the grilling season, which unofficially kicks off Memorial Day.
Technical analysis: June live cattle gapped below the April lows but support at the March low of $130.975 held and the contract filled the initial gap. The March low is key near-term support, followed by the lows from last fall in the $128.60 to $127.875 range. Bulls need a close above the 10-day moving average at $134.325 to give technical signals of a short-term low.
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.
