Livestock Analysis | May 26, 2022
Price action: June lean hogs rose $2.05 to $111.10, while July hogs rose $3.875 to $111.825, the contract’s highest closing price since $114.60 on April 28.
Fundamental analysis: Hog futures extended the recent rally and closed at four-week highs on a strengthening cash market and bullish chart signals. The CME lean hog index rose 84 cents to $103.87 (as of May 24), the sixth daily gain in a row and the highest since last August. The next index figure is expected to gain 53 cents to $104.40. Premiums of summer-month hog futures are presently around $6 to $7 above the cash index. The five-day rolling average national direct cash hog price today was quoted at $111.79. Pork cutout values rose $1.82 early today $108.90, led by gains in hams. Movement was lighter at 123.32 loads.
Also today, USDA reported net weekly U.S. pork export sales at 36,700 MT for 2022, up 52% from the previous week and up 39% from the four-week average. On the bearish side, May hog slaughter and pork production numbers are suggesting USDA under-counted pig numbers in its March Hogs and Pigs report. However, it appears consumers are actively buying pork for grilling, likely due to the higher beef prices at the meat counter.
Technical analysis: July hog futures scored a bullish “outside day” higher on the daily bar chart, putting bulls and bears back on a level near-term technical playing field, though bulls now have momentum. The next upside objective for hog bulls is to close July futures above solid resistance at $115.00. The next downside objective for the bears is closing prices below solid support at $102.50. First resistance is seen at today’s high of $112.025, then $113.00. First support is seen at $110.00, then $109.00.
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 May and all corn-for-feed needs covered through mid-June.
Price action: June live cattle rose 10 cents to $132.40, while August futures rose 7.5 cents to $132.60. August feeders fell $1.275 to $166.675.
Fundamental analysis: Live cattle futures posted modest gains despite further signs of weakness in cash prices, as the Monday-Wednesday average for live steers fell $1.75 to $138.46 from last week’s comparable figure. Choice beef values rose $1.21 early today to $264.14 after dropping the day before. The latter two factors, along with strong gains in U.S. stocks and crude oil futures, provided a supportive backdrop for commodities. Recession concerns may have weighed on deferred cattle futures. The fed cattle and grain markets seemed to provide little guidance for feeder cattle futures, but strong soy complex gains largely reversed big early losses in corn and wheat, fueling concern over high feed costs that burdened feeders.
Technical analysis: Bears retain a short-term technical advantage, but couldn’t force a close below support at the June contract’s 10-day moving average near $132.31. Today’s low at $131.95 adds a layer of support below that point, with additional support levels around $131.00 and $132.00. Still, a breakdown through those levels would likely have bears targeting the psychological $125.00 level. Initial resistance at the contract’s 20-day moving average near $132.94 is backed by yesterday’s high at $133.55, with pivotal resistance persisting at the contract’s 40-day moving average of $134.41. A bullish breakout would then face stiff resistance in the April 25 chart gap between $136.85 and $138.35.
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.
