Livestock Analysis | November 29, 2021
Price action: February lean hogs fell 10 cents to $80.925, the contract’s lowest closing price since $80.55 on Nov. 12. April futures and other deferred contracts ended slightly to moderately higher.
Fundamental analysis: Nearby hog futures fell under profit-taking and followthrough selling from last Friday’s general commodity sell-off amid concern over the Covid Omicron scare. Solid losses in the cattle futures markets today also produced some spillover selling pressure in lean hog futures. Nearby December lean hog futures are still trading at a premium to cash, with was also a negative today.
The CME lean hog index fell 93 cents to $71.63, the lowest since early February, and the next quote is expected to drop $1.03. But a spike in wholesale pork prices suggests demand may be improving. Pork cutout values rose $7.50 early today to $91.48, led by a gain of nearly $20 in hams. Movement was decent at 147.92 loads by midday. The national direct cash hog price fell 23 cents to $55.10
Technical analysis: Lean hog bulls still have the overall near-term advantage. Prices are in a four-week-old uptrend on the daily bar chart. The next upside price objective for the 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 today’s high of $82.025, then at $83.00. First support is seen at last week’s low of $80.425, then at $80.00.
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 and feeder cattle futures posted sharp losses, with December live cattle down $1.175 to $136.925, while February futures fell $1.90 to $139.30, after earlier reaching a contract high at $141.85. January feeders fell $1.425 to $165.725.
Fundamental analysis: Cattle futures started out with a mildly firmer tone, but buyer interest dried up and profit-taking surfaced. Given the recent strong runup in prices and with November coming to an end, it wasn’t overly surprising to see the market pull back on corrective selling. But today’s price action does heighten attention to a potential top – something that must be watched the next couple of days, especially after the calendar flips to December.
Last week’s cash cattle price averaged $138.17, up another $5.06. With packers having access to contracted supplies for December starting later this week, there is some talk they could back off their recent aggressive raising of prices. But market-ready supplies are also tight as feedlots used the price surge to get current on marketings and likely pulled some animals forward. That should keep the cash market from weakening much if any.
Choice boxed beef prices firmed $2.56 this morning, to $282.57, while Select rose 73 cents, though movement was light at just 28 loads. While prices look to have stabilized, packers must be cognizant of whether they can move enough product at current levels.
Technical analysis: February live cattle futures posted a new contract high before turning sharply lower and closing below the five-day moving average and the August high. Today’s price action could be an exhaustion tail. Near-term support is the 10-day moving average at $138.35. Uptrend support drawn off the October and November lows intersects at $137.48 tomorrow, which lines up with the 20-day average to form stronger support. Today’s high at $141.85 is near-term resistance.
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.
