Livestock Analysis | January 31, 2022
Price action: April lean hogs rose 77.5 cents to $95.70 today, nearer the session high.
Fundamental analysis: Nearby lean hog futures posted good gains today amid continued solid cash market fundamentals. However, the May and June contracts saw some mild profit-taking pressure. Overall, the hog market is pausing after recent strong price gains, and this pause is not bearish. April futures hold a large premium of $13.55 to the cash index, which may somewhat limit further buying interest in futures.
The pork cutout value rose $3.27 this morning to $99.66. Movement at midday was decent at 194.94 loads. High retail beef prices are likely to keep a near-term floor under the wholesale pork market. The five-day rolling average national direct cash hog price today was $65.01. The CME lean hog index will rise $1.54 to $82.15 for Tuesday. Slaughter levels are on the rise, which should alleviate notions of market-ready animals getting backed up. Today’s hog slaughter was 475,000, up 27,000 from one week ago but down 2,000 from last year’s level.
The U.S. dollar index today backed down from a 1.5-year high posted late last week, and that’s a positive for hog market bulls looking for better weekly USDA pork export sales numbers. Spring and summer lean hog futures prices are below year-ago cash levels. With lower hog supplies projected in the coming months, such should be a bullish element for the hog markets into springtime.
Technical analysis: Lean hog futures bulls have the solid overall near-term technical advantage. Prices are in a 2.5-month-old uptrend on the daily bar chart. The next upside price objective for bulls is to close April futures above solid chart resistance at $100.00. The next downside price objective for bears is closing prices below solid technical support at $91.475. First resistance is at the contract high of $97.50 and then at $98.00. First support is at $93.625 and then at $92.50.
What to do: Get current with feed advice. We are targeting a drop to the $385 area (50% retracement of the November-to-January rally) to further extend coverage. You remain hand-to-mouth on corn-for-feed needs. Our target for extending corn coverage would be a drop to the $5.75 area.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have all soymeal needs covered in the cash market through the end of January. You remain hand-to-mouth on corn-for-feed needs.
Price action: Live cattle futures posted moderate to strong gains, with the April contract ending $1.425 higher at $144.525, its highest close since Dec. 31. Feeder cattle posted sharp gains, with the March contract up $3.40 to $163.025.
Fundamental analysis: Feeder cattle surged amid the reversal in the corn market during daytime trade after corn futures scored contract highs overnight. Additional support came from strength in the cash feeder cattle market. Results from the Oklahoma City feeder cattle auction showed prices generally $2 to $4 higher compared with last week.
Live cattle futures keyed off feeders’ rally to extend last week’s strong close. While the average cash cattle price softened 55 cents last week to $136.95, there’s hope recent strength in futures will encourage packers to raise cash cattle bids this week. The midweek storm forecast for the Central and Northern Plains, along with the Midwest, could encourage packers in the northern market to either be active early in the week, though they could wait until after the storm to buy the bulk of their cattle. The storm “will be significant enough to bring on some notable livestock stress because of cold rain, freezing rain, sleet and heavy snow,” World Weather Inc. said.
Wholesale beef trade saw Choice prices slip 4 cents this morning, while Select firmed $1.80. Packers moved only 38 loads in morning trade.
Technical analysis: April live cattle futures pushed above resistance at the Jan. 19 high of $143.775 and filled the Jan. 4 gap at $144.075. Last remaining resistance on the daily chart is the contract high at $145.85. Above that, resistance on the continuation chart would be in the $148 to $150 range. Today’s gap from $143.275 to $143.225 is near-term support, followed by the 5- and 10-day moving averages at $142.25 and $142.18, respectively.
What to do: Get current with feed advice. We are targeting a drop to the $385 area (50% retracement of the November-to-January rally) to further extend coverage. You remain hand-to-mouth on corn-for-feed needs. Our target for extending corn coverage would be a drop to the $5.75 area.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have all soymeal needs covered in the cash market through the end of January. You remain hand-to-mouth on corn-for-feed needs.
