Livestock Analysis | December 22, 2021
Price action: February lean hog futures rose 92.5 cents to $83.35, the contract’s highest closing price since $84.25 on Nov. 24
Fundamental analysis: Hog futures extended yesterday’s rally and settled at a four-week high on strengthening cash fundamentals and expectations USDA will report continued shrinkage in the U.S. herd. The CME lean hog index rose 9 cents to $73.02, the highest since Nov. 22 and an unusually high $10.33 above February futures. Signs of stronger retail demand also supported futures. Pork cutout values rose $3.00 early today to $87.91, up from $85.82 at the end of last week. Movement by midday was about 129 loads.
USDA’s Hogs and Pigs Report tomorrow is expected to reflect continuing contraction in U.S. animal numbers. All hogs and pigs as of Dec. 1 are expected to total 74.594 million head, down 2.9% from the same date a year earlier, based on a Reuters survey of analysts. The number of hogs kept for breeding, an indicator or expansion or contraction, is expected to rise 0.1%. The number of hogs kept for marketing is expected to decline 3.1%.
Technical analysis: Chart patterns have grown more bullish in lean hogs, with the February contract closing above the 100-day moving average at around $81.25 and the 200-day moving average at $82.05. The next upside price objective for market bulls is to close February futures above solid resistance at the November high of $84.675. Downside levels to watch include last week’s low at $78.675.
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: February live cattle rose 45 cents to $137.375, the highest closing price since Dec. 14. March feeder cattle rose 92.5 cents to $161.775.
Fundamental analysis: Improving investor risk appetite in the general marketplace at mid-week helped to lift the cattle futures markets. U.S. stock indexes rebounded sharply from early-week lows amid easing Covid concerns. Strong rallies in grain futures also supported cattle futures, overshadowing reports South Korea suspended beef imports from Canada, which reported its first case of bovine spongiform encephalopathy (BSE) in six years.
Gains in cattle futures may be limited by weaker cash cattle trade this week. Cash trade around $135 was reported Tuesday in the Southern Plains, down about $2.00 from last week’s average live steer price. Packer interest has waned in a holiday-shortened week and cash prices may decline into the end of the year. However, one source said cash cattle prices are firming at mid-week, from earlier in the week. The source said packers may bid up cash prices next week, likely needing cattle for after the holidays. In recent weeks packers have been buying for delayed delivery.
Choice cutout values fell 14 cents early today to $261.25, while Select rose 99 cents. Movement by midday was decent at 83 loads. USDA’s monthly Cattle on Feed Report tomorrow is expected to show feedlot placements rose 3.2% in November compared with the same month in 2020, based on a Reuters survey. Compared to pre-Covid November 2019, last month’s projected placements would be down 6.2%.
Technical analysis: Live cattle bulls hold a slight near-term technical advantage, though a three-week downtrend remains on the daily bar chart. Upside objectives include closing February futures above solid resistance at $139.00. The next downside objective for bears is closing February below solid support at $133.00. First resistance is seen at this week’s high of $137.65, then at last week’s high of $139.275. First support is seen at $136.00, then at this week’s low of $135.50.
Feeder cattle bulls and bears are on a level overall near-term technical playing field. However, prices have been trending lower for three weeks. The next upside objective for bulls is to close January futures above resistance at $165.00. The next downside price objective for bears is to close prices below solid support at $155.00. First resistance is seen at today’s high of $162.15 and then at $164.00. First support is seen at $160.00, then at this week’s low of $158.40.
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.
