Livestock Analysis | June 13, 2022
Price action: June lean hogs rose 20 cents to $108.00, while July hogs rose $1.20 to $106.675.
Fundamental analysis: Hog futures shrugged off weakness in cattle and grain markets and posted strong gains, supported by cash market strength and signs of solid demand. Today’s CME lean hog index fell 12 cents to $107.19 but is projected to rise 21 cents tomorrow to $107.40 (as of June 10). Still, based on the discounts in July and August hogs, there’s growing sentiment the cash hog market has put in a seasonal top. Pork cutout values early today rose $2.84 to $112.00, led by gains in loins and hams. Movement at midday was strong at 192 loads. The national direct five-day rolling average cash hog quote today was $116.01. A seasonal downturn in daily hog slaughter levels in the coming weeks may help to limit further downside price pressure in the cash and futures markets.
Technical analysis: Lean hog futures bears have a near-term technical advantage, though the July contract scored a bullish “outside day” higher on the daily chart after rebounding from a four-week low. The next upside objective for bulls is to close July futures above solid resistance at the June high of $114.00. The next downside objective for bears is closing prices below solid support at $100.00. First resistance is seen at today’s high of $107.20, then $108.00. First support is seen at $105.00, then today’s low of $103.525.
What to do: Be prepared to extend feed coverage on price weakness.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all corn-for-feed needs covered through mid-June. You are hand-to-mouth on soybean meal needs.
Price action: Live cattle futures finished sharply lower with the June contract $2.20 lower to $134.00, while August live cattle fell $2.325 to $133.875. Feeder cattle also finished sharply lower, with the August contract down $3.15 to $171.325.
Fundamental analysis: Strong pressure from outside markets weighed heavily on cattle futures to start the week. Broad-based selling was seen in the commodity sector, while the stock market also traded sharply lower, while the U.S. dollar surged. That strong outside market influence fueled active followthrough selling in cattle futures after a poor finish last week.
The heavy price pressure today along with a weak start for wholesale beef trade this morning likely points to lower cash cattle prices for the week. Last week, the cash price averaged $140.14, up $2.07 from the previous week. While initial signs point to the cash market weakening, feedlots are current, which means they have some negotiating power if they want to extend cash negotiations.
Feeder cattle traded sharply lower despite selling in the corn market and strength in cash feeder cattle prices. Cash feeders traded steady to $3 higher at the Oklahoma City auction.
Technical analysis: August live cattle futures left a gap on the daily chart from $135.475 to $136.025, which will serve as initial resistance. To negate today’s short-term topping signs, bulls must fill the gap. Today’s low at $132.45 is initial support, with additional support in the $131.00 to $130.00 area.
What to do: Be prepared to extend feed coverage on price weakness.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have all corn-for-feed needs covered in the cash market through mid-June. You are hand-to-mouth of soybean meal needs.
