Livestock Analysis | December 30, 2021
Price action: February lean hogs fell $1.125 cents to $82.70, down from $83.225 at the end of last week.
Fundamental analysis: Yesterday’s drop in pork loin values seemed to trigger futures selling today, stirring concern over consumer demand, even though pork cutout values early today soared $9.25 to an average of $93.54, the highest daily reading since mid-November. Today’s gains were led by a jump of over $18 in loins and nearly $16 in bellies, though it’s quite possible that true to recent patterns, cutout values will end the day at much lower levels.
Recent fluctuations in the CME lean hog index may raise skepticism whether the cash market actually established a seasonal low. Tomorrow’s index is expected to fall 45 cents to $71.75, which followed two straight days of gains. There’s also concern the first-quarter 2022 outlook will not match up to the premiums already built into the nearby February and April contracts.
Once again, the market’s path in early 2022 depends on the balance between substantially reduced hog and pork supplies going forward and the suppressive impact of elevated retail meat prices on consumer demand. We continue thinking the price outlook, especially for late spring and summer, is much stronger than indicated by deferred futures.
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 fell 75 cents to $139.975, down from the four-week high of $141.425 reached yesterday. December live cattle, which expires tomorrow, fell 35 cents to $139.05, after ending yesterday at $139.40, the highest settlement for a nearby contract since March 2016.
Fundamental analysis: Live cattle futures fell under mild corrective pressure following yesterday’s gains. Despite reports of firmer cash prices, buyer interest is limited ahead of year-end. Cash cattle traded $2 to $3 higher yesterday compared with last week in the northern market, though trade in the southern market remained quiet. Recent strength in wholesale beef suggests a pick-up in retailer demand for January promotions. Choice cutout values fell 65 cents early today to $265.06, down from a three-week high the previous week. Select values rose 80 cents to $257.89. Movement by midday totaled 55 loads.
A sharp drop in weekly beef export sales may have contributed to pressure in cattle futures. USDA reported net weekly U.S. beef sales totaling 6,300 MT for the week ended Dec. 23, down 48% from the previous week and down 55% from the prior four-week average. For the year to date, total U.S. beef commitments (exports plus outstanding sales), at 1.083 MMT, are running 14% above last year’s levels.
Technical analysis: Bulls have a near-term technical advantage in live cattle with the upswing earlier this week pushing February futures above most moving averages and near the contract high of $141.85 posted Nov. 29. Upside price objectives for market bulls include closing February futures above solid resistance at the November high. For bears, downside objectives include closing February below solid support at the December low of $135.50. First resistance is seen at $141.85, then at $143.00. Support is seen at the 10- and 20 daily moving averages around $138.25 to $138.40, respectively.
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.
