Livestock Analysis | June 2, 2021
Price action: August lean hogs closed down $0.775 at $116.80 today. Prices closed near mid-range today on a corrective pullback and some profit taking after hitting a contract high on Tuesday.
Fundamental analysis: Lean hog futures prices are reaching extremes set in 2014 and now the key will be export demand for U.S. pork. Traders will have to wait until Friday for this week’s USDA weekly export sales tallies, due to the Memorial Day holiday on Monday. Hog prices in China continue to fall. Even farms using their own piglets are now losing money. That may trim new Chinese purchases of U.S. pork.
The ransomware attack on JBS that interrupted hog processing early this week appears to be past the market now. Cash hog prices today rose a solid $3.21 on a national direct basis. The pork cutout value climbed another $2.67 at noon Wednesday on movement of 221.30 loads. Butts and hams led the gainers. Today’s hog slaughter was estimated by USDA at 439,000 head, compared to 483,000 last Wednesday and 426,000 one year ago at this time. A sign that all operations are not yet up to 100%
Technical analysis: The hog bulls have the solid overall near-term technical advantage. There are no early clues that a market top is close at hand. A six-month-old uptrend remains in place on the daily bar chart. The next upside price objective for the hog bulls is to close August prices above solid chart $120.00. The next downside price objective for the bears is closing prices below solid technical support at $110.00. First resistance is seen at the contract high of $118.30 and then at $119.00. First support is seen at today’s low of $115.25 and then at $113.875.
What to do: Get current with feed advice. Be prepared to extend corn coverage on a drop to the $6.00 area in July futures and $5.00 in December futures. Be prepared to add to third quarter hog hedges and establish fourth-quarter coverage.
Hedgers: You should have 25% of third-quarter production hedged in July hog futures at $95.375.
Feed needs: You should have all soybean meal needs covered in the cash market through July, along with 50% for August and 25% for September. You have all corn-for-feed needs covered in the cash market through June, along with 25% of third-quarter needs.
Price action: Cattle futures ended higher after a rally that began late-morning extended through midday. August Live cattle rose $2.65 to $119.25 per hundredweight and August feeder cattle rose $3.175 to $152.325 per hundredweight.
Fundamental analysis: Futures rebounded from yesterday’s declines amid relief that a ransomware attack on JBS, one of the top U.S. beef and pork processors, did not lead to sustained market disruptions. JBS said today it resumed operations at most slaughter plants after the cyberattack forced a temporary shutdown at several.
Futures remain supported by ongoing strength in beef prices. Choice boxed beef averaged $339.88 per hundredweight this morning, up $5.32 from yesterday and the highest since a pandemic-driven spike about a year ago.
On cash cattle markets, trading was slow to start the week in the Southern Plains, with insufficient purchases to discern a market trend. Live steers averaged $119.64 at the end of last week, according to the USDA. Slaughter numbers were expected to bounce back after the JBS shutdown resulted in a sharp decline in kills. But Wednesday’s cattle slaughter was an estimated 105,000 head, down from 120,000 head a week ago, according to the USDA.
Technical analysis: Cattle’s late rally today restored some bullish momentum for the market, as August futures closed above the downside gap between Friday’s low of $118.55 and Tuesday’s high of $117.80. August rose as high as $119.55. Last week’s high of $121.55 may be the next target for bullish traders. Support includes the 100-day moving average near $118.85 and then the April low of $115.925.
What to do: Get current with feed advice. Be prepared to extend corn coverage on a drop to the $6.00 area in July futures and $5.00 in December futures.
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 July, along with 50% for August and 25% for September. You have all corn-for-feed needs covered in the cash market through June, along with 25% of third-quarter needs.
