Livestock Analysis | January 3, 2022
Price action: February lean hogs fell 35 cents to $81.125, the contract’s lowest closing price since $79.475 on Dec. 20.
Fundamental analysis: Hog futures fell to a two-week amid followthrough selling from last week’s sharp losses and lack of direction from the cash market. The latest CME lean hog index fell 45 cents to $71.75, still within the range of roughly $71.00 to $73.00 over the past month. But February futures’ unusually large $9.375 premium to index likely kept some futures buyers on the sidelines. Over the past five years, the cash index has firmed roughly $7 from the end of the year to mid-February, when the February contract expires.
Price downside may be limited with packers resuming a full slaughter schedule for the week and wholesale pork showing signs of strength. Pork carcass cutout values fell $2.75 early today to $88.60, led by a drop of near $9.00 in loins. Movement by midday was 216 loads. Cutout values gained $7.37 in December.
Technical analysis: Last week’s technically bearish weekly low close put the near-term price uptrend in jeopardy. But hog market bulls still hold a slight near-term technical advantage, but a three-week uptrend on the daily bar chart is in serious jeopardy. The next upside price objective for bulls is to close February futures above solid resistance at $85.00. The next downside objective for bears is closing February below solid support at $77.50. First resistance is seen at today’s high of $82.00, then at $83.00. First support is seen at $80.00, then at $79.00.
What to do: Get current with feed advice.
Hedgers: You currently have all risk in the cash market.
Feed needs: You are hand-to-mouth on corn-for-feed and soybean meal needs. Wait on price pullbacks to extend coverage.
Price action: Live cattle futures finished low-range on the day, with the February contract down 77.5 cents to $138.925. Feeder cattle were unable to hold earlier gains and also finished low-range, with the March contract down 42.5 cents to $169.525.
Fundamental analysis: Futures and cash trade was relatively quiet to open the new year. The low-range close in live cattle sets the market up for followthrough selling tomorrow. But if seller interest is light, some buying could surface under the market.
Traders are watching the development of this week’s cash cattle trade, which may require a few days before packer-feedlot negotiations turn active. Last week’s average live steer price of $139.59 was up $3.95 from the previous week and was the first weekly gain in four. With packers buying cattle for full slaughter schedules after the holidays, there are prospects for higher cash prices again, though traders probably will be cautious in futures as they await trade to develop.
After a two-week absence due to the holidays, the Oklahoma City feeder cattle auction returned with mixed prices noted this morning.
Technical analysis: Last week’s high at $141.425 looks like a short-term top in February live cattle. Initial support is the 10-day moving average at $138.79, which was just below today’s low, followed by the 20-day average at $138.425. Resistance is layered from the five-day average at $139.745 to the contract high at $141.85.
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 are hand-to-mouth on corn-for-feed and soybean meal needs. Wait on price pullbacks to extend coverage.
