Livestock Analysis | November 22, 2021
Price action: December lean hog futures rose 90 cents to $74.65 and February lean hogs rose 55 cents to $83.025 today, nearer the session high.
Fundamental analysis: Hog futures started strong in the holiday-shortened week. December lean hogs are now trading above cash hog index, which tomorrow is projected to drop 58 cents to $72.88, the lowest since Feb. 10. But there’s growing trade confidence the index is near a short-term low. Soaring retail beef prices also may be bullish for the hog market, signaling substitution demand for pork at the grocery store meat case in the weeks ahead.
Pork carcass cutout values early today rose $1.32 to an average of $91.14, led by a gain of $10.46 in bellies. Movement by midday was strong at nearly 194 loads. The national direct average carcass price early today fell 5 cents to $54.90.
Meatpackers last week slaughtered an estimated 2.635 million head of hogs, up 0.8 % from the previous week but down 3.4% from the same week in 2020. Year-to-date, hog slaughter is running 2.1% under 2020 levels. Today’s hog slaughter is estimated at 480,000 head compared to 480,000 last Monday and 501,000 one year ago at this time.
Technical analysis: Lean hog bulls have the overall near-term advantage, with prices in a three-week uptrend on the daily bar chart. The next upside price objective for hog bulls is to close February futures above solid resistance at the October high of $87.475. The next downside price objective for bears is closing February below solid support at $78.00. First resistance is seen at last week’s high of $83.725 and then at $85.00. First support is seen at the Nov. 17 low of $82.125, then at $80.725.
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 futures finished moderately to sharply higher today, with December cattle up 90 cents to $134.425, the highest closing price for a nearby contract since April 2017. February live cattle rose $1.275 to $138.975, the contract’s highest closing price since $139.00 on Aug. 26. January feeder cattle rose 77.5 cents to $161.70.
Fundamental analysis: Live cattle futures showed followthrough buying to last week’s strong price performance. Last Friday’s USDA Cattle on Feed report was neutral and had little to do with today’s price action. Instead, futures were still supported by ongoing strength in the cash market. Last week’s average price of $133.11 rose $1.64 from the previous week and marked a 4 1/2-year high. The question is whether packers will be aggressive with cash bids again this week after actively buying cattle the past three weeks.
Wholesale beef prices firmed this morning, with Choice up $1.63 and Select $1.49 higher. Choice beef rose back above $280 after three days below that level to finish last week. That’s the level where retailer buying started to build on the drop below it during July.
Feeder cattle firmed along with live cattle today, instead of trading lower on strength in the corn market. The other supporting factor was strength in the cash feeder cattle market, with prices as much as $10 higher in the Oklahoma City auction.
Technical analysis: After hugging the trendline from the Oct. 1 low for week, December live cattle futures have accelerated away from the uptrend line. The next strong resistance is at $138.90. Initial support on the daily chart is the five-day moving average at $133.01 and the 10-day average near $132.50. This month’s gap from $128.725 to $127.50 on the continuation chart is additional near-term support.
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.
