Livestock Analysis | December 19, 2022
Price action: February lean hogs fell 7.5 cents to $85.70, after earlier rising to $86.55, the highest intraday price since Dec. 7.
Fundamental analysis: Nearby hog futures were pressured by mild profit-taking and corrective selling following Friday’s rally, as well as continued weakness in cash fundamentals. The CME lean hog index fell 33 cents to $81.55 (as of Dec. 15), ending a string of three consecutive increases. Tuesday’s index is expected to drop 71 cents at $80.84, the lowest since late January. The national direct five-day rolling average cash hog price today was $80.79. Pork cutout value early today rose 58 cents to $88.02, led by a gain of over $16 in bellies. Movement at midday was decent at 191.6 loads.
Choppy, light-volume trading is likely this week ahead of the holiday weekend. season. Selling pressure is likely to be limited amid still-tight supplies as hog weights are running more than five pounds per head below year-ago levels. Last week’s slaughter was 2.2% under the same week last year. Reduced packer activity over the next two holiday weeks may pressure the cash hog market. Traders also await USDA’s quarterly Hogs & Pigs Report after Friday’s close.
Technical analysis: Hog futures bears have a slight near-term technical advantage. The next upside objective for bulls is to close February futures above solid resistance at $90.00. The next downside objective for bears is closing prices below solid support at the December low of $81.525. First resistance is seen at today’s high of $86.55 and then at $88.00. First support is seen at today’s low of $84.825, then the November low of $83.725.
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 rose 27.5 cents to $156.05, the contract’s highest close since Dec. 13. January feeder cattle fell $1.675 to $182.10. Prices closed nearer the session lows today.
Fundamental analysis: Live cattle futures rose modestly behind strength in wholesale beef and expectations cash prices will remain supported by tight supplies even as the holidays limit packer buying the rest of the year. Live steers averaged $155.69 last week down just 10 cents from last week’s average and near the 7 1/2-year high posted earlier this month. Packers have restricted cash cattle purchases the past two weeks and will be buying for holiday-shortened kills the remainder of the year, which may limit their willingness to aggressively bid. With Christmas and New Year’s Day falling on Sundays, some plants are planning to take extended weekends the next two weeks.
An upturn in wholesale beef the past two weeks indicated packers’ price cuts stimulated retail buying. Choice grade cutout values rose $1.01 early today to $263.84, the highest daily average since Nov. 9 but still a preliminary figure. Select grade gained $1.66 to $237.11. Movement was light at 32 loads.
Traders are also watching a major winter storm accompanied by very low temperatures expected to barrel across the U.S. west and Plains in the coming days. The storm is likely to disrupt at least some cattle coming to market as well as stress animals. USDA’s monthly Cattle on Feed Report Friday afternoon is expected to show feedlots numbers continued to shrink below year-ago levels and portending still-tight supplies of slaughter-ready animals in 2023.
Technical analysis: Bulls hold a firm near-term technical advantage in live cattle futures. However, stiff resistance levels lie just overhead of current prices. 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 prices below solid support at the November low of $152.275. First resistance is seen at $156.775, then $157.225. First support is seen at $154.675, then $154.00.
Feeder cattle bulls have a slight near-term technical advantage. The next upside objective for bulls is to close January prices above resistance at $187.00. The next downside price objective for bears is to close prices below solid support at the November low of $176.325. First resistance is seen at $184.00 and then at the December high of $184.90. First support is seen at today’s low of $181.60 and then at $180.00.
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.
