Livestock Analysis | September 12, 2022
Price action: October lean hogs fell $1.30 to $91.875, nearer the session low.
Fundamental analysis: Eroding cash hog market fundamentals continued to pressure hog futures. The CME lean hog index fell 69 cents to $99.57, a four-month low, and Tuesday’s expected quote (for Sept. 9) is down another $1.28 to $98.29. The October hog contract still holds a nearly $8 discount to the cash index, and while the gap has narrowed sharply over the past month, futures traders appear to expect more cash weakness in the near term. The five-day rolling average national direct cash hog price today was quoted at $94.16.
Signs the wholesale pork market has established a bottom may help support futures. Pork cutout values rose $3.83 early today to $106.70, led by gains in bellies. Movement by midday was strong at 174.32 loads. Hog traders will closely monitor this week’s slaughter. A decline from year-ago levels would help confirm the relative tightness of hog supplies. However, today’s slaughter was estimated by USDA at 483,000 head compared to 470,000 on this day last year.
Technical analysis: Hog futures bears have a near-term technical advantage with prices in a four-week downtrend on the daily bar chart. The next upside objective for hog bulls is to close October futures above solid resistance at $95.00. The next downside objective for bears is closing prices below solid support at the July low of $86.825. First resistance is seen at last week’s high of $93.45, then $94.40. First support is seen at $91.00, then at $90.00.
What to do: Be prepared to extend feed coverage when market bottoms are in place.
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.
Price action: October live cattle rose 7.5 cents to $145.75, the contract’s highest closing price since Aug. 17. October feeder cattle fell $2.45 to $183.125, the lowest close in over a week.
Fundamental analysis: Live cattle futures ended mixed, with nearby October higher amid ideas the cash market is near a short-term bottom and may climb as supplies of market-ready animals tighten this fall. Feeder cattle were pressured by gains in the corn and soymeal markets, after USDA lowered its U.S. crop estimates more than expected. USDA-reported live steers averaged $142.17 last week, down $2.31 from the previous week’s average. Cash trade probably won’t establish until the middle of this week, but the firm futures tone and premiums deferred contracts such as December hold to October indicate traders anticipate at least steady-to-firmer prices. Choice beef cutout values rose $2.12 early today to $259.38, though movement was light at 49 loads by midday.
USDA, in its monthly Supply and Demand update earlier today, raised estimated U.S. beef production in 2022 by 16,000 pounds to 28.07 million pounds. Production in 2023 is expected to drop 6% to 26.4 million pounds. USDA also raised its estimate for live steers in 2022 by 70 cents to $142.80.
Technical analysis: Bulls retain a short-term technical advantage in October and are likely targeting the August high of $146.25. A close above that mark would have bulls targeting the contract high of $147.50, posted April 22. Initial support is seen at last week’s high of $145.50, followed by the 20- and 10-day moving averages around $144.35 and $144.175, respectively.
What to do: Be prepared to extend feed coverage when market bottoms are in place.
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.
