Livestock Analysis | June 30, 2022

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Hogs

Price action: August lean hog futures fell $1.475 to $102.10, the contract’s lowest closing price since $98.975 on May 12.

Fundamental analysis: Hog futures sank to a seven-week closing low amid eroding cash market fundamentals. The roughly $7 discount August futures hold to the cash index suggests the cash market has put in a seasonal top. The preliminary CME lean hog index quote for Thursday is $100.84, down 42 cents from Wednesday’s official figure of $111.26. The national direct five-day rolling average cash hog quote today is $117.72. Pork cutout values early today fell $1.47 to $107.09 on lighter movement around 115 loads. Bellies led the declines.

USDA’s Hogs & Pigs report Wednesday afternoon had little impact on futures. USDA said the June 1 inventory was down 0.9%, with the marketing herd also down 0.9% and the breeding herd 0.8% smaller than a year ago. The figures were close to being in line with market expectations. Early today, USDA reported net weekly U.S. pork sales of 32,300 MT for 2022, up 27% from the previous week.

Technical analysis: Hog market bears have a solid near-term technical advantage. The next upside price objective for bulls is to close August futures above solid resistance at the June high of $111.05. The next downside price objective for bears is closing prices below solid support at the May low of $98.65. First resistance is seen at today’s high of $105.20, then $107.00. First support is seen at today’s low of $100.25, then $98.65.

What to do: Be prepared to extend feed coverage on a pullback to the recent lows.

Hedgers: Carry all risk in the cash market for now.

Feed needs: You are hand-to-mouth on corn-for-feed and soybean meal needs.

 

Cattle

Price action: August live cattle rose 40 cents to $132.575, while August feeder cattle rose $2.45 to $176.225.

Fundamental analysis: Nearby live cattle futures rose for the first session in three and rebounded from an initial drop to four-week lows as corrective buying emerged in the wake of the market’s recent slide. There were some signs of modest strength in cash markets around mid-week, with sources reporting trade in the $137 to $141 range in the Southern Plains and with bids around $232 in the northern dressed market, generally steady to firmer compared with last week. But through Wednesday morning, USDA-reported live steers averaged $140.66, down nearly $4 from last week's average. Feeder cattle futures were supported by a slump in corn futures, which ended near four-month lows.

High retail beef prices appear to be depressing demand, which may be further under pressure if a recession prompts consumers to cut back on pricier foods. Choice beef cutout values fell $1.00 early today to $263.88 on movement of 68 loads. Signs of stronger exports may have encouraged buyers. USDA early today reported net U.S. beef sales of 17,000 MT for 2022, up 52% from the previous week and up 6% from the prior four-week average. 

Technical analysis: Bears retain a near-term technical advantage in August live cattle futures even with today’s firmer close with prices still in a sharp two-week downtrend. Initial support is placed at today’s low of $131.70. A push below that level would have bears aiming for the $131.00 low May 23, then the pivotal $130.00 and $125.00 levels. Initial resistance at today’s August live cattle high of $133.075 is backed by the contract’s 40-day moving average just under $134.00 and the 10-day moving average at $134.225.

What to do: Be prepared to extend feed coverage on a pullback to the recent lows.

Hedgers: Carry all risk in the cash market for now.

Feed needs: You are hand-to-mouth on corn-for-feed and soybean meal needs.

 

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