Livestock Analysis | December 6, 2021

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Hogs

Price action: February lean hog futures fell $3.275 to $78.225, the lowest closing price since $79.325 on Nov. 10. December hogs fell $1.95 to $72.05.

Fundamental analysis: Bearish overall cash market fundamentals continue to pressure hog futures, though strength in the wholesale pork market may help limit price downside. Pork carcass cutout values early today jumped $7.73 to $86.70, led by a surge of over $23.00 in bellies. Movement by midday was decent at 217.19 loads. However, other components of the cash market continued to sag. National direct carcass hog values fell to $56.16. The CME lean hog index was down 33 cents to $70.53, near a 10-month low reached Nov. 29. Tomorrow’s cash index is projected to rise 25 cents to $70.78.

December futures’ ongoing premium to the cash index still suggests the cash hog market has put in near-term bottom. But until the cash index turns consistently higher, buying in lean hog futures is likely to remain limited, especially given February’s large premium to the cash index. Also negative for futures and cash, hog slaughter will likely post a seasonal rise the next two weeks. Also, seasonal ham demand should peak over the next week or so, then decline rapidly as grocers complete their wholesale purchases for Christmas.

Technical analysis: Lean hog bears have gained a near-term technical advantage. The next upside objective for bulls is to close February futures above solid resistance at the December high of $82.70. The next downside objective for the bears is closing prices below solid support at the November low of $74.05. First resistance is seen at $80.00, then at today’s high of $80.925. First support is seen at $77.50, 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.

 

Cattle

Price action: Live cattle futures finished high-range with gains of 47.5 to 72.5 cents through the June contract. February live cattle firmed 70 cents to $139.65. Feeder cattle posted moderate to strong gains, with January contract up $1.125 to $165.25.

Fundamental analysis: Live cattle futures were supported by ongoing strength in the cash market. Last week’s average live steer price firmed another $2.27 to $140.44, the ninth consecutive weekly gain, which somewhat surprised traders since packers had fresh contract supplies available. Given tight market-ready supplies after feedlots pulled animals forward in recent weeks, we expect this week’s cash trade to steady-firmer, though the market is due for a pause.

Wholesale beef trade got off to sluggish start this morning with only 47 loads traded amid a 3-cent drop in Choice cutout values, to $274.33, and a $1.68 rise in Select cutouts, to $260.32.

Feeder cattle were supported by a combination of strength in live cattle, weakness in corn and good demand for feeders. While initial trade at the Oklahoma City auction was light, demand was reportedly moderate to good.

Technical analysis: Bulls continue to have a solid upper hand on the daily live cattle charts. February live cattle finished today right in the middle of the broad range formed by last week’s low and high. Last Tuesday’s low at $137.35 will serve as key near-term support, as a close below that level would violate the uptrend from the fall lows and open downside risk to the $135.50 area. Last Monday’s contract high at $141.85 is near-term resistance, followed closely by $141.90 and $142.10 on the continuation chart.

What to do: Get current with feed advice. Short-term protective hedges may be needed if this week’s 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.

 

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