Livestock Analysis | December 29, 2021
Price action: February lean hogs rose $1.20 to $83.825, still down from a four-week intraday high of $84.65 posted yesterday.
Fundamental analysis: Renewed optimism about the winter outlook boosted nearby hog futures. The CME Lean Hog Index continued its late-year bounce, rising 38 cents to $72.20. While pork cutout values slipped 97 cents to $83.86 early today, traders may expect the final quote to post a gain, since pork loin primal values plunged over $19 while hams rose $12.32.
Still, there is considerable optimism built into nearby futures, as indicated by the February contract’s $13.00-plus premium over the index. We expect a projected 6% annual decline in winter hog supplies to exacerbate the usual early-winter rally. Also, strength in cash cattle prices in some parts of the Midwest may support hogs. Elevated beef prices are likely to spur substitution demand for pork during the coming weeks. Conversely, 2022 price prospects may be limited by the comparatively high retail cost of both beef and pork.
Technical analysis: Hog market bull hold a short-term advantage, especially with the market rallying from pivotal support extending from the $82.60 top of the huge Sept. 27 chart gap. Additional support stems from the Oct. 12 low of $81.025, with considerable backing from the 40-day moving average at $80.79. However, resistance at the Nov. 26 high of $84.675 has proven formidable lately. A push above that level would likely face stiff resistance at $86.25, as well as the Oct. 1 peak at $87.475.
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 moderate to strong gains, with the February contract up $1.325 to $140.725. March feeder cattle rose $2.825 to $165.05, the highest closing price since Dec. 2.
Fundamental analysis: Cattle futures were supported by reports of higher cash trade. Cash sources reported cash trade at $2 to $3 higher prices compared with last week in the northern market. Trade in the southern market remained quiet, though the firmer northern trade should entice other packers to raise bids from last week.
Strength in the wholesale beef market also provided support. Choice boxed beef prices firmed $1.21 and Select was $1.11 higher this morning, while packers moved a solid 79 loads at the higher prices. This week’s wholesale beef trade suggests packers are restocking for beef features early in the new year.
Feeder cattle shrugged off intra-day strength in the corn market. While many of the bigger feeder cattle auctions were closed this week, the strength in the fed cattle market spurred some hopes of stronger demand and prices in cash feeder cattle after the holidays.
Technical analysis: A pool of buy stops was triggered above yesterday’s high and the Dec. 3 high in February live cattle, though the contract ran out of steam before testing the contract high. Today’s high at $141.425 is initial resistance, followed by the contract high at $141.85. Near-term support extends from $140.375 to $137.935. The Dec. 3 high, yesterday’s high, the five-day moving average and the 10-day average are within that range.
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.
