Livestock Analysis | March 20, 2023

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: April lean hogs plummeted $2.10 to $77.775, nearer the session low.

Fundamental analysis: Last week’s bear efforts were apparently far from over as heavy selling continued today amid hovering macroeconomic concerns. The CME lean hog index continued its recent string of slow gains with a 6-cent increase to $80.01 as of March 16, with the preliminary figure indicating a 46-cent drop to $79.56. Though recent declines in the pork cutout value indicate retailers are lowering wholesale prices to attract better demand, the upcoming grilling season should underpin prices. The noon report showed a $1.30 rebound in the pork cutout value to $82.25 on movement of 180.9 loads.

China reported imports of 380,000 MT of U.S. pork in January and February, indicating a near 36% increase from year-ago. China’s pork imports increased late last year with expectations of a similar climb this year, particularly as the country is reportedly fighting a new outbreak of African swine fever (AFS). Early estimates indicate that 10% of China’s sow herd has been hit with the latest wave of AFS, with official estimates noting 8-15% of the countries total production could be lost in the current outbreak.

Technical analysis: April lean hogs traded a $1.60 range after gapping lower to begin the session with an early violation of initial support of $78.53. Bears were able to force a close below the level, turning $77.19 into initial support with additional support at $76.08. A turn higher will find initial resistance at former support of $78.53, then at $80.98 and $82.09.

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 soybean meal needs covered in the cash market through April. You have all corn-for-feed needs covered in the cash market through mid-April.  

 

 

Cattle

Price action: April live cattle fell 30 cents to $162.025 and nearer the session low. May feeder cattle lost 80 cents at $199.15 and nearer the session low. 

Fundamental analysis: The cattle futures markets once again fell victim to shaky U.S. and European financial banking systems that raise the odds of a global economic recession which could crimp consumer demand for beef. The recent big sell off in the hog futures market is also likely lending some spillover pressure on cattle futures.

Last Friday’s USDA Cattle on Feed Report was mostly neutral. The March 1 inventory was down 4.5% from year-ago, which was in line with market expectations. Placements and marketings in February were at 7.2% and 4.9%, respectively, below year-ago levels.

On the positive side, recent slaughter levels still suggest supply tightness of market-ready animals. Also, steer dressed weights for the week ended March 4 were at an average of 899 pounds, down 20 pounds per head from a year-ago. 

The average cash cattle traded price was lower last week, with the official figure at $164.17 compared to $165.40 the prior week. We expect cash trade this week to be around steady from last week. The noon beef report showed Choice grade prices up 19 cents at $283.54, while Select grade rose $1.17 to $273.61. Movement at midday was light at 38 loads. The Choice-Select spread narrowed to $9.93.

Technical analysis: Live cattle futures bulls have the slight overall near-term technical advantage, but their edge has faded recently. A five-month-old uptrend on the daily bar chart has been negated to suggest a market top is in place. Live cattle bulls' next upside price objective is to close April futures prices above solid resistance at $164.225. The next downside technical objective for the bears is closing prices below solid technical support at the January low of $158.55. First resistance is seen at today’s high of $163.10 and then at $164.00. First support is seen at the March low of $161.10 and then at $160.00.

The feeder cattle futures bulls also have the slight overall near-term technical advantage. However, a six-week-old uptrend on the daily bar chart has been negated. A bearish V-Top reversal pattern has formed on the daily bar chart, as well as a bearish pennant pattern. These elements suggest a near-term market top is in place. The next upside price objective for the feeder bulls is to close May futures prices above technical resistance at last week’s high of $203.20. The next downside price objective for the bears is to close prices below solid technical support at $194.00. First resistance is seen at today’s high of $200.875 and then at $202.50. First support is seen at last week’s low of $198.25 and then at $197.00.

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 soybean meal needs covered in the cash market through April. You have all corn-for-feed needs covered in the cash market through mid-April.  

 

 

 

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