Livestock Analysis | June 27, 2022
Price action: July lean hog futures fell 75 cents to $110.175. August hogs fell $1.90 to $104.875.
Fundamental analysis: Weakness in summer hog futures suggests traders believe the cash hog market will trade steady at best in the coming weeks. Daily slaughter levels over the next three weeks likely will drop near the lowest levels of the year. The big August futures’ discount to cash, presently over $5.00, reflects expectations for larger animal supplies after mid-July and that the cash market is close to a peak.
The CME lean hog index was up 22 cents today at $110.91, the highest since last August and up over $11 from mid-May. The national direct five-day rolling average cash hog prices was quoted today at $117.39. Pork cutout values early today fell 67 cents to $111.53, led by declines in bellies. Movement was decent at 150.26 loads. U.S. pork export sales will also have to show some improvement in the coming weeks if the hog market bulls want to see prices sustain an uptrend, especially with U.S. stockpiles on the rise.
Technical analysis: Hog futures bears hold a near-term technical advantage. The next upside price objective for the hog bulls is closing August futures above solid resistance at the June high of $111.05. The next downside price objective for bears is closing prices below solid support at the June low of $101.30. First resistance is seen at $107.00 and then at today’s high of $108.70. First support is seen at last week’s low of $103.575 and then at $102.00.
What to do: Be prepared to extend feed coverage on a pullback to the recent lows.
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.
Price action: August live cattle rose 10 cents to $133.475 and nearer the daily high. August feeder cattle rose $1.625 at $174.125 and near mid-range.
Fundamental analysis: Live and feeder cattle futures rallied in late trading after prices traded near session lows just before midday. Cattle futures were lifted by last Friday’s friendly USDA Cattle on Feed Report. USDA reported the June 1 feedlot inventory up 1.2% from a year ago when a 1.4% rise was expected. May placements fell 2.1%, while a 0.4% decline was expected). Marketings rose 2.4% as a 3.0% increase was expected.
The noon beef report was also friendly for futures, showing Choice grade cutout values up $4.11 at $269.09, with Select up $1.13 at $246.15. Movement at midday was 46 loads. Cash cattle trade firmed up late last week. USDA reported live steers averaged $144.50 through last Thursday morning, up from the previous week's average of $143.67. Lower corn futures prices today helped to lift feeder cattle futures.
Traders this week will more closely examine USDA’s daily livestock slaughter reports, which will reflect last week’s average steer weights, to get an indication of how severely cattle suffered from recent hot weather in Plains states. A significant drop in weights would imply the heat greatly stressed cattle and it would likely take time for them to recover, suggesting supplies of fed cattle will remain tight.
Technical analysis: Live cattle futures bears have a near-term technical advantage as prices are starting to trend down. Bulls' next upside price objective is to close August live cattle above solid resistance at the June high of $137.95. The next downside objective for bears is closing prices below solid support at the May low of $129.975. First resistance is seen at today’s high of $134.275, then $136.00. First support is seen at $132.00, then $131.00.
Feeder bulls and bears are on a level overall near-term technical playing field. Prices are still in a choppy, four-week-old price uptrend on the daily bar chart. The next upside objective for bulls is to close August futures above resistance at the April high of $178.225. The next downside price objective for the bears is to close prices below solid support at the May low of $162.80. First resistance is seen at $175.00, then last week’s high of $176.10. First support is seen at $172.00, then at $170.55.
What to do: Be prepared to extend feed coverage on a pullback to the recent lows.
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.
