Livestock Analysis | November 8, 2021
Price action: December lean hog futures fell 17.5 cents to $76.375 and near the session low.
Fundamental analysis: It was a quiet start to the week in lean hog futures, with a bearish near-term technical posture weighing on the December contract. Improving cash market fundamentals failed to stir buying interest. Pork cutout value early today surged $6.91 to $101.87, led by a gain of $21 in hams, likely reflecting holiday buying. Movement was decent at 175.04 loads by midday. Cash hog prices on a national direct basis were down 12 cents today, with a five-day rolling average price of $59.70. The latest CME lean hog index was up 37 cents to $78.69 and is projected for Tuesday at up 66 cents at $79.29. Today’s hog slaughter is estimated at 477,000 head compared to 472,000 last Monday and 491,000 one year ago at this time.
The hog market bulls continue to expect better times just over the horizon. Hog numbers and slaughter totals are down from last year and are expected to stay tighter in 2022. Year-to-date, hog slaughter is running 2.0% under 2020 levels. U.S. pork exports have also improved recently. The stronger export sales numbers suggest wholesale pork prices dropped enough to boost overseas buying interest.
Technical analysis: Lean hog bears have the overall near-term technical advantage. However, a four-week-old downtrend on the daily bar chart has been negated to suggest a market bottom is in place. The next upside price objective for the hog bulls is to close December prices above solid chart resistance at $80.00. The next downside price objective for the bears is closing prices below solid technical support at the September low of $71.275. First resistance is seen at today’s high of $78.325 and then at last week’s high of $78.225. First support is seen at today’s low of $75.875 and then at $75.00.
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: December live cattle futures rose 30 cents to $132.10, the contract’s highest closing price since $132.20 on Sept. 2 and the highest settlement for a nearby contract since June 2017. January feeder cattle firmed 70 cents to $160.30, a two-week high close.
Fundamental analysis: December live cattle extended last week’s gains behind strong cash fundamentals. Live steers in five top feedlot areas averaged $129.23 last week, the fifth consecutive weekly increase and the highest weekly average since February 2018. Importantly, feedlots moved a lot of cattle at the sharply higher prices last week, cleaning up laggard marketings. That should pave the way for additional cash gains in the weeks ahead, though packers won’t need to buy as many animals this week, which could cause a temporary pullback in the cash price.
Wholesale beef prices have climbed to five-week highs, a sign of stronger retail demand. Choice beef cutout values last week averaged $287.52, up 1.4% from the previous week and up 38% from the same week a year ago. But early today, Choice values fell 65 cents to $288.89.
Tomorrow’s monthly USDA Supply and Demand Report will include updated U.S. beef export projections. In October, USDA kept it 2021 and 2022 beef export forecasts unchanged.
Cattle slaughter last week totaled an estimated 650,000 head, down 2.8% from the previous week and down 0.3% from the same week a year ago. So far this year, cattle slaughter is still running 3.1% ahead of the same period in 2020.
Technical analysis: December live cattle rose as high as $132.50, the highest intraday price since $132.575 on Sept. 3. The market favors bulls, as prices are in an uptrend that began at the beginning of October and trading above all major moving averages. Chart levels to watch include the 100-day moving average around $131.20 and the contract high at $138.225. December futures have yet to entirely fill a small gap on the daily chart created Nov. 3 that extends to $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.
