Livestock Analysis | March 9, 2023
Price action: April lean hogs edged 67.50 cents lower to $85.075, a mid-range close after marking the highest intraday level since Feb. 27.
Fundamental analysis: Lean hogs failed to extend gains from the previous two sessions, as technical resistance at the 40-day moving average proved challenging for bulls. Gradual upside efforts on behalf of the cash index has tempered buying-interest in spring-and-summer-month futures, with a mild 20-cent gain with an official quote of $79.29 as of March 8, which is $7.18 off the late January low, but nearly $20 below year-ago. Wednesday’s preliminary figure is an additional mild 10 cent bump to $79.39. USDA’s National Pork Carcass Cutout values fell 34 cents to $87.32 in the morning report, indicating retailers are hesitant when cutout prices move into the upper $80.00 range.
USDA reported weekly export sales of 22,100 MT of pork in 2023 in week ended March 2, which was down 29% from the previous week and 44% from the four-week average and 13% from the same week last year. Increases were primarily for Mexico (10,700 MT, including decreases of 500 MT), South Korea (3,800 MT, including decreases of 500 MT and Columbia (1,200 MT, including decreases of 100 MT.)
Technical analysis: April lean hogs traded a $2.15 range, with attempts early in the session to extend gains for a third straight day, though notable resistance at the 40-day moving average near $85.62 capped bull efforts. A breach of the level will find bulls then find bulls taking aim at further resistance of $86.54, then $87.33 and $88.50. While bears were able to grasp a slightly lower close, their efforts to sustain a close below the 10-day moving average and support at $84.59 ultimately proved futile. A turn below these levels will then find bears working towards resistance around $83.43 and $82.00.
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 soymeal needs covered in the cash market through the end of March. You have all corn-for-feed needs covered in the cash market through mid-April.
Price action: Nearby April live cattle futures slid 65 cents to $164.80 Thursday, while most-active April feeder futures fell 92.5 cents to $199.15.
Fundamental analysis: The cattle and beef complex couldn’t avoid the general commodity selloff Thursday, although traders did have some cause for concern based on the latest price developments. Beef packers apparently persuaded a feedlot or two to take steady money for their cattle Wednesday, with the $163.00-$164.00 quotes averaging out to a rise of just 23 cents from the same period last week. Packer buyers likely emphasized this week’s drop in choice beef cutout, which fell over $5.00 from Monday’s close at $290.20 to Wednesday’s close at $294.78. It slipped another 11 cents this morning. Select cutout at $276.13 is down only slightly from Monday, which suggests the choice losses reflect retailer resistance to higher packer asking prices for high-quality stuff. We seriously doubt packers are going to persuade many producers to take steady money this week, much less anything less than they got last week. Feedyard managers almost surely remember taking prices in the $120’s during 2021 when wholesale beef prices soared over $300 and packers were making over $1,000 per animal processed.
Losses in feeder futures matched or exceeded those posted by fed cattle, which was rather surprising given the concurrent losses posted by the corn market. Fresh strength in soybean meal prices may have played a role in that development.
Technical analysis: Bulls still hold the short-term technical advantage in April live cattle futures despite falling through former support at the contract’s 10- and 20-day moving averages near $165.27 and $164.94 today. Respective secondary and initial resistance at those levels is backed by the contract high of $166.675 reached Monday. Bulls are likely still targeting the psychological $170.00 level, as well as the all-time high around $172.00. Today’s low marked initial support at $164.50, with backing from last Thursday’s low of $163.85. Bears are targeting the 40-day moving average at $163.36.
Bulls clearly still own the short-term technical advantage in April feeder futures despite today’s reversal from a fresh contract high and low-range close. Look for initial resistance around today’s opening at $199.475, at the psychological $200.00 level, then at the daily high of $200.775. Bulls are likely targeting $205.00. Today’s low confirmed support around $198.60, with yesterday’s low marking added support near $197.65. A drop below that point would have bears targeting the 10-day moving average near $196.31, then the 20-day moving average near $193.77.
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: Cover all soymeal needs in the cash market through the end of March. You also extend corn-for-feed coverage another two weeks in the cash market through mid-April.
