Livestock Analysis | December 5, 2022
Price action: February lean hogs rose 10 cents to $90.525, the contract’s highest close since Nov. 17.
Fundamental analysis: Hog futures traded mixed, with the February contract initially surging to a 2- 1/2-month high but giving back most of those gains by the close. Price strength reflected growing beliefs the cash market is nearing a bottom. The CME lean hog index fell 37 cents to $82.87, the lowest level since late January, and is expected to fall another 8 cents Tuesday. The December contract has slightly more than a week until expiration and will likely remain closely aligned with the cash index. A recent upturn in wholesale pork also encouraged buyers. Pork cutout values rose 88 cents early today to $89.82, the highest daily average since Nov. 22 but still only a preliminary reading.
USDA estimated last week’s hog slaughter 2.59 million head, 66,000 head under the same week last year. The current slaughter pace lags last year’s levels by nearly 3%.
Technical analysis: February lean hogs traded a $2.075 range, testing resistance at $91.20, with a final close below the level. Attempts higher will continue to encounter resistance at $91.20, as well as $91.975 and $93.375. Conversely, a turn lower will find bears meeting support first at $89.025, with solid support standing at the 20-day moving average near $88.78, the 10-day around $88.19, the 40-day near $87.85 and 100-day at $87.8350.
What to do: Get current with advised feed coverage. Be prepared to extend coverage on additional price pressure.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have all corn-for-feed and soybean meal needs in the cash market through December.
Price action: February live cattle fell 5 cents to $155.825, around the middle of the day’s range. January feeder cattle gained $1.325 to $183.775, the contract’s highest close since Sept. 19.
Fundamental analysis: Bullish cash market fundamentals continued to support live cattle futures, though today’s gains were limited by bearish outside markets, including a stronger U.S. dollar index, sharply lower crude oil prices and a sell-off in the U.S. stock market. Feeder futures were supported by the corn market’s drop to 3 1/2-month lows.
Expectations for continued strength in cash market likely will support futures. Live steers averaged $156.42 last week, up 35 cents from the previous week and the ninth consecutive weekly increase. Weakness in the wholesale beef market continues amid higher daily slaughter levels. Choice beef cutout values fell $2.69 to $247.24, a seven-week low. Select grade cutout value fell $1.47 to $223.09. The Choice-Select spread is presently $24.15. Movement at midday was 68 loads.
Technical analysis: Live cattle bulls have a solid near-term technical advantage. However, stiff overhead resistance levels lie just overhead. Bulls' next upside objective is closing February futures above solid resistance at the contract high of $157.225. The next downside objective for bears is closing February below solid support at the November low of $152.275. First resistance is seen at today’s high of $156.375, then the November high of $156.95. First support is seen at today’s low of $155.45, then $154.75.
Feeder cattle bulls have also gained a near-term technical advantage. The next upside objective for bulls is to close January futures above resistance at $188.00. The next downside objective for bears is to close prices below solid support at the November low of $176.325. First resistance is seen at today’s high of $184.20, then $185.00. First support is seen at today’s low of $181.95, then $181.00.
What to do: Get current with advised feed coverage. Be prepared to extend coverage on additional price pressure.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have all corn-for-feed and soybean meal needs in the cash market through December.
