Livestock Analysis | December 20, 2021
Price action: February lean hogs fell $1.325 to $79.475 today and nearer the session low.
Fundamental analysis: Bearish outside markets spooked hog futures today, along with many other commodity markets. The U.S. stock market swooned, as did crude oil, amid concern over the spread of the Omicron coronavirus variant concerns about export demand for U.S. pork. Some countries in Europe have implemented restrictions and lockdowns.
Pork cutout values rose $1.64 early today to $84.86, led by gains in bellies and hams. Still, seasonal factors suggest the ham market will face pressure in the near-term as retailers wrap up holiday buying. Pork movement was decent at 217.20 loads by midday. The CME lean hog index dropped 8 cents to $72.33 but is still near a three-week high reached Dec. 15. On national direct cash markets, carcasses averaged $58.28. Today’s livestock slaughter is estimated at 480,000 head compared to 476,000 last week and 487,000 one year ago at this time.
China reported imports of 200,000 MT of pork in November, the same amount as October but down 38.7% from last year. Through the first 11 months of this year, Chinese pork imports at 3.54 MMT are down 10.3% from the same time last year.
Technical analysis: Lean hog futures bears have the overall near-term advantage, but recent price action still suggests a market bottom is in place. The next upside objective for the market bulls is closing February futures above solid resistance at the November high of $84.675. The next downside objective for bears is closing prices below solid support at the December low of $75.35. First resistance is seen at today’s high of $80.275, then at last week’s high of $81.475. First support is seen at last week’s low of $78.675, then at $77.00.
What to do: Get current with feed advice.
Hedgers: You currently have all risk in the cash market.
Feed needs: You should have all soybean meal needs covered in the cash market through December. You are still hand-to-mouth on corn-for-feed needs.
Price action: Live cattle futures posted slight losses today, with the February contract down 45 cents to $135.975, the contract’s lowest closing price since $135.85 on Nov. 4. April live cattle fell 42 1/2 cents to $140.175. Feeder cattle finished sharply lower, with the March contract down $1.20 to $160.50.
Fundamental analysis: The cattle market faced followthrough selling pressure after a poor performance last week. But given generally strong risk-off trade to open the week, live cattle didn’t perform too poorly today, offering some hope for a corrective rebound if outside market pressure eases.
Cash cattle averaged $137.19 last week, down $2.50 from the previous week and the second consecutive weekly decline. Cash cattle prices are expected to weaken again this week as packers have consecutive holiday-shortened slaughter weeks and the wholesale beef market is struggling to find a bottom. Choice beef dropped 82 cents this morning to $262.19, though Select boxes firmed $2.81.
Feeder cattle faced heavy selling despite weakness in the corn market. The widely-watched Oklahoma City feeder cattle auction won’t be held the next two weeks due to the holidays. January and March futures are now trading below the CME feeder cattle index.
Technical analysis: February live cattle futures closed below the 100-day moving average for the first time since Nov. 2. Next support is a 61.8% retracement of the rally from the October low to the November high, which is around $134.39, followed by the 200-day average near $134.10. Initial resistance is the 5-day average at $136.865 and then old support at $137.35.
What to do: Short-term protective hedges for fed cattle producers may be needed if recent lows are violated.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all soybean meal needs covered in the cash market through December. You are still hand-to-mouth on corn-for-feed needs.
