Livestock Analysis | August 18, 2022
Price action: October lean hogs fell the $4.75 daily trading limit to $93.30, the lowest closing price in nearly five weeks.
Fundamental analysis: Hog futures extended a sharp downturn on chart breakdowns and beliefs the cash market peaked as the market heads into a seasonally weak period. Traders reckon the cash and pork product markets will now trend lower in the coming weeks. The latest CME lean hog index (for Tuesday) is down 44 cents to $120.62, the fifth drop in the past six sessions. Tomorrow’s index is expected to drop another 2 cents. The national direct five-day rolling average cash hog price today is $123.51. Pork cutout values early today rose 5 cents to $118.52, though bellies dropped $7.75. Movement by midday totaled 122 loads.
USDA’s weekly export sales report was again disappointing, showing net weekly U.S. pork sales at 13,600 MT for 2022, down 37% from the previous week and down 43% from the four-week average. Also, China imported 120,000 MT of pork in July. That’s unchanged from June but down 65% from July of last year.
Technical analysis: Hog futures bulls faded badly today as a price uptrend on the daily chart was soundly negated to suggest a market top is in place. The next upside objective for bulls is to close October futures above solid resistance at $100.00. The next downside objective for bears is closing prices below solid support at $90.00. First resistance is seen at $95.00, then $96.00. First support is seen at today’s low of $93.60, then $92.50.
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 fell $1.10 to $144.75. September feeder cattle fell $1.85 to $185.275.
Fundamental analysis: Cattle futures pulled back from strong gains the two previous sessions amid support from cash fundamentals. Widening spreads between Choice and Select-grade beef values are indicative of a shortage of market-ready fed cattle. Choice beef values rose 27 cents early today and Select rose $1.36. USDA-reported live steers averaged $147.48 so far this week, indicating the final number will surpass last week’s average of $144.39. Feeder futures were pressured as corn and soymeal turned steadily higher by mid-morning. October feeder futures reached 190.20 in yesterday’s session, after a solid two-day rally, marking a contract high.
USDA reported net weekly U.S. beef export sales at 18,937 MT, a two-week high and up 70% from the same period last year. The top buyer was China with 7,400 MT. Exports were pegged at 18,970 MT, putting the marketing-year total at 597,000 MT.
Technical analysis: October live cattle turned lower today; however, the April 22 high of $147.50 remains a target for bulls as likely attempts to fill the gap from the following session on April 25. However, resistance will stand at 146.32 and 146.83. A close below support near $145.27 was sustained, with next support holding around $144.68. The 10-day moving average at $144.54 represents near-term technical significance.
September feeders remained poised to continue to the upside, with the 10-day moving average at 184.54 serving as technical support, with the 20-day moving average at 183.33 as next level resistance. A breakout above the contract high of $188.25 would be a six year high, making yesterday’s high of $187.775 strong resistance for bulls to power through.
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.
