Livestock Analysis | November 4, 2021
Price action: December lean hog futures jumped $1.925 to $77.875, the highest closing price since $78.75 on Oct. 18.
Fundamental analysis: Hog futures gained an early boost from USDA’s weekly export sales report, which showed net U.S. pork sales reached 45,700 metric tons for the week ended Oct. 28, topping the week prior result by 55% and the average for the previous four weeks by 72%. Whether that buying pace will be sustained is an open question, but strong sales figure suggests wholesale pork prices have fallen far enough to spur overseas buying interest. Export buying may have helped boost pork cutout values lately.
Pork cutout values early today slipped $1.22 to $99.22, still near a two-week high yesterday. Big swings in ham prices have played a major role in the recent shifts in pork cutout. However, the fresh wholesale strength has not translated into cash market gains, as indicated by the preliminary CME Lean Hog Index quote at $78.32, down 38 cents. December futures ended the day below the index.
Technical analysis: Bullish hog traders hold the technical advantage after today’s surge smashed chart resistance extending from the Aug. 11 low at $77.30, as well as the 40-day moving average near $77.37. They proved unable to force a close above the extended downtrend line drawn across the contract’s July and August highs, now at $78.00. That level is backed by resistance extending from the Aug. 6 low at $79.90. That’s also quite close to the top of the huge Sept. 27 chart gap between $77.20 and $79.75. A close back below the break-out levels noted above would have bears targeting the Sept. 10 low at $75.775, then the Oct. 28 low at $71.80.
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: December live cattle fell $1.025 to $130.625 and nearer the session low. November feeder cattle fell $1.15 to $158.025.
Fundamental analysis: Live and feeder cattle futures were pressured by profit-taking and corrective pullback following gains earlier this week. Cash market fundamentals continued to improve, with asking prices for live cattle early today around $2 higher. Trade was still relatively slow, as packers appeared unwilling to push bids much higher than early-week levels, but feedlot operators are digging in their heels and seeking even higher prices. Choice beef cutout values early today rose $1.05 to $289.54, the highest in almost a month, while Select grade was up $1.60. Movement by midday was 59 loads.
USDA earlier today reported net weekly U.S. beef sales of 16,700 MT, down 13% from the previous week but up 15% from the four-week average. South Korea (6,700 MT) and China (2,800 MT) were prominent buyers. Retail U.S. beef prices likely didn’t decline significantly last month, which suggests renewed export demand is boosting the cash and wholesale markets.
Technical analysis: Live cattle market bulls have a near-term advantage and have restarted a four-week-old uptrend on the daily bar chart. Upside objectives including closing December futures above solid resistance at $134.00. Downside objectives for the bears include closing December below solid technical support at $128.00. First resistance is seen at today’s high of $132.00 and then at this week’s high of $132.40. First support is seen at $130.00 and then at $129.00.
Feeder cattle futures bulls and bears are on a level overall near-term technical playing field. The next upside price objective for the feeder bulls is to close November futures prices above technical resistance at the October high of $162.475. The next downside price objective for the bears is to close prices below solid technical support at the September low of $152.00. First resistance is seen at today’s high of $159.325 and then at this week’s high of $160.00. First support is seen at $157.50 and then at $156.575.
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.
