Livestock Analysis | December 27, 2021
Price action: February lean hogs rose 42.5 cents to $83.65, the contract’s highest closing price since $84.25 on Nov. 24.
Fundamental analysis: Hog futures were supported by strength in wholesale pork and USDA’s latest Hogs & Pigs Report, which showed the U.S. hog herd 4.0% down from a year ago, a larger decline than expected. Analysts expected a drop closer to 2.9%. Hogs kept for breeding were little changed at 6.18 million head, compared to expectations for a 0.1% increase over year-ago levels.
Upbeat general marketplace attitudes were also supportive for hog futures, as global stocks were mostly higher. Crude oil prices also jumped to a four-week high. While the coronavirus is still a serious situation around the globe, traders and investors believe the situation is manageable due to improved vaccines and new drugs to fight the effects of the virus.
Pork cutout values rose 75 cents early today to $92.22, led by a $20 surge bellies. Movement by midday was strong at 232.41 loads. The latest CME lean hog index fell 66 cents to $71.67, the lowest since Dec. 9. The projected index price tomorrow is down 55 cents at $71.12.
Technical analysis: Hog futures bulls have gained a slight near-term technical advantage, with prices in a three-week uptrend. The next upside objective for market bulls is closing February futures above solid resistance at the October high of $87.475. The next downside objective for bears is closing February below solid support at $77.50. First resistance is seen at the November high of $84.675, then at $86.00. First support is seen at $82.45, then at $81.00.
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: The expiring December live cattle contract finished 25 cents higher at $137.30. Deferred live cattle ended slightly lower, with February futures down 35 cents to $139.275. Feeder cattle posted losses in most contracts, with January feeders down $1.05 to $162.40.
Fundamental analysis: Live cattle futures were initially supported by spillover from strength in the hog market and a generally firmer tone in risk-based markets. But buyer interest dried up, though futures worked off their session lows into the close.
Last Friday’s USDA Cattle on Feed Report was neutral and had limited impact on today’s trade. More attention through the week will be on cash cattle trade. Last week’s cash market averaged $135.64, down $1.55 from the previous week. A steady to weaker cash tone is likely again this week as packers will likely opt to reassess their near-term needs at the start of the new year.
Feeder cattle were pressured by strength in the corn market. The Oklahoma City auction is closed again this week for the holidays.
Year-end positioning could impact cattle futures into year-end. Funds are heavily long live cattle, so that would be the market most at risk of year-end profit-taking.
Technical analysis: February live cattle are near the middle of the broad short-term range from the November contract high at $141.85 to last week’s low at $135.50. Initial resistance is today’s high at $140.325, followed by the August high at $140.55 and then the contract high. Near-term support is layered from $138.205 to $137.15, where the short- and intermediate-term moving averages are located. Stronger support is at the 100-day average at $136.10 and then last week’s low.
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.
