Livestock Analysis | May 23, 2022
Price action: June lean hog futures rose $1.50 at $110.375. July hogs rose $1.85 at $110.85, a three-week closing high.
Fundamental analysis: Price action in lean hog futures the past two trading sessions has energized the hog bulls, especially the chart-based traders, to suggest more upside price action is in the cards this week. Hog traders may also have been encouraged today by the impressive gains in cattle futures, in the face of last Friday’s bearish USDA cattle on feed
An up-trending cash hog market and notions seasonal price strength in cash and futures has kicked in are supporting the hog market. The CME lean hog index was up 80 cents today to $101.17 (as of May 19), the third straight daily gain and near a two-week high. The cash hog index for Tuesday (as of May 20) is projected at $102.08, up 91 cents. Also market-friendly is summer-month lean hog futures’ premiums to the cash index are now over $9.00. Today’s national direct five-day rolling average cash hog prices was quoted at $109.06. Pork cutout value at noon today rose 71 cents at $107.82, amid by broad strength in cuts and led by bellies. Movement was decent at 158.97 loads.
USDA released its monthly Cold Storage Report after today’s close. The data detailed frozen meat stocks at the end of April. The five-year average is a 16.4-million-lb. increase in pork stocks during the month.
Technical analysis: Lean hog futures bulls now have momentum and the recent price action suggests a near-term market low is in place and that prices can continue to trend sideways to higher in the near term. The next upside price objective for the hog bulls is to close July prices above solid chart resistance at $115.00. The next downside price objective for the bears is closing prices below solid technical support at the May low of $97.375. First resistance is seen at today’s high of $111.125 and then at $112.00. First support is seen at $110.00 and then at $109.00.
What to do: Cover all soybean meal needs in the cash market through May. Be prepared to extend coverage on further price weakness. You are hand-to-mouth on corn-for-feed needs.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have all soybean meal needs covered in the cash market through May. Be prepared to extend coverage on price weakness. You are hand-to-mouth on corn-for-feed needs.
Price action: August live cattle rose $1.425 to $132.975, up from an early drop to a 6 1/2-month low and the contract’s highest closing price since May 17. August feeder cattle rose $1.70 to $165.625.
Fundamental analysis: Live cattle fell earlier today in response to Friday’s bearish Cattle on Feed Report, which continued to show expansion in feedlot supplies. But price downside may have been mitigated by continued strength in hog futures and firmness in wholesale beef. Choice beef cutout values rose $1.53 early today to $263.70, the highest since April 26. Movement by midday was 67 loads. With retailers having secured supplies for Memorial Day weekend grilling, traders will watch boxed beef prices and movement closely for a gauge of consumer demand over the summer.
USDA on Friday estimated feedlot placements during April at 1.809 million head, down 0.9% from the same month in 2021 but well-above expectations for a drop closer to 4.6% and the second straight month placements surpassed expectations. The May 1 feedlot inventory was 11.967 million head, up a higher-than-expected 2.0% and the fifth consecutive monthly increase. April marketings fell 2.2% from year-ago, slightly under the average trade estimate.
On the cash markets, early week trade was reported around $138.00 in Kansas, suggesting further cash softening this week. USDA-reported live steers averaged $140.26 last week, down $2.19 from last week’s average of $142.44 and the second consecutive weekly decline.
Technical analysis: Nearby live cattle remain in a month-long downtrend, but bulls may have turned the tables today, as August futures posted a bullish “outside day” higher, with the contract falling under Friday’s low before surging higher to settle above Friday’s high. The market with need to show followthrough buying in coming days to confirm a potential reversal. Initial resistance is seen around August live cattle’s 10-day moving average at $132.95 and last week’s high at $134.40. Support is seen at today’s low of $131.00.
What to do: Cover all soybean meal needs in the cash market through May. Be prepared to extend coverage on further price weakness. You are hand-to-mouth on corn-for-feed needs.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have all soybean meal needs covered in the cash market through May. Be prepared to extend coverage on price weakness. You are hand-to-mouth on corn-for-feed needs.
