Livestock Analysis | November 15, 2021
Price action: December lean hog futures fell 7.5 cents to $75.80, while February hogs rose 62.5 cents to $81.175, near the session high and a four-week closing high.
Fundamental analysis: Weak cash fundamentals pressured nearby hog futures, while speculative buying and prospects for stronger export demand next year supported deferreds. Pork carcass cutout values early today jumped $7.46 to $99.98, led by a gain of almost $37.00 in hams. Movement was decent at 164.07 loads. Today’s national direct cash hog price was down 13 cents at $57.95, on a five-day rolling moving average. The CME lean hog index was down $1.27 today to $76.68, the lowest level since February.
Meatpackers last week slaughtered an estimated 2.614 million head, up 0.4% from the previous week but down 2.5% from the same week in 2020. Year-to-date, slaughter is running 2.0% under 2020 levels. Hog slaughter historically climbs to a yearly high in mid-December, suggesting increasing supplies in the pipeline as high retail prices curb domestic demand. Record high retail pork and beef prices may prompt consumers to shift to cheaper substitutes, such as chicken. Today’s hog slaughter is estimated at 486,000, compared to 467,000 last Monday and 480,000 one year ago at this time.
Technical analysis: Lean hog bulls have gained a slight near-term technical advantage, with prices in a three-week uptrend on the daily bar chart. The next upside price objective for the hog bulls is to close February futures above solid resistance at $84.00. The next downside price objective for the bears is closing futures below solid technical support at the October low of $74.05. First resistance is seen at $82.00 and then at $73.00. First support is seen at today’s low of $79.875 and then at $79.00.
What to do: Get current with feed advice.
Hedgers: You currently have all risk in the cash market.
Feed needs: You should have all corn-for-feed and soybean meal needs covered in the cash market through October.
Price action: Live cattle finished with a narrowly mixed tone today. December live cattle dropped 35 cents to $131.775. Feeder cattle finished mostly firmer, though the December contract dropped 32 1/2 cents to $155.925.
Fundamental analysis: Price action was quiet in the live cattle market today, signaling traders sense the cash market may be ready to pause after an extended upturn and two very active weeks of purchases by packers. Last week’s average cash price came in at $131.47, up another $2.24 and the highest weekly average since early June 2017. Packers bought 119,000 head after buying 97,000 head the week before. After falling behind on marketings, feedlots have essentially gotten current the past two weeks. While that may slow packer interest this week, it is a positive sign for cash trade in the weeks ahead.
The wholesale beef market has hit a soft patch, dropping another $1.40 in Choice boxes this morning. A decline in rib prices has led the recent pullback in the cutout, signaling demand for year-end prime rib features has likely stalled. That could lead to additional near-term declines in wholesale beef prices.
Feeder cattle found limited support from the mild downturn in corn futures. Cash feeder cattle prices at the Oklahoma City auction were mixed this morning.
Technical analysis: December live cattle futures are pivoting around the 50% retracement of the price drop from the contract high to the October low. Near-term resistance is last Friday’s high at $132.625, followed by a 61.8% retracement at $133.21. Near-term support is the bottom of the Nov. 3 chart gap at $130.425.
What to do: Get current with feed advice. Be prepared to add cattle hedges if the rally stalls.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all corn-for-feed and soybean meal needs covered in the cash market through October.
