Livestock Analysis | November 9, 2021
Price action: Continued wholesale losses and a dip in the CME hog index seemed to undercut hog futures, as December futures fell $1.425 to $74.95.
Fundamental analysis: After climbing substantially early last week, pork cutout values declined late last week and have continued doing so early this week. The noon Tuesday report indicated a $1.60 slide to $91.55. The wholesale weakness may also be weighing upon cash prices. As depicted by the CME lean hog index, which rallied from $78.32 on Nov. 3 to $79.29 on Friday, Nov. 5, the preliminary quote for Monday came in six points lower at $79.23.
Still, supplies are down significantly from last year, as indicated by last week’s slaughter total at 2.603 million head, 3.5% below the comparable 2020 result. The weekly reductions seen lately, as well as persistently low frozen pork stockpiles, offer some support for ideas that the cash market may post an early low this year (as opposed to the recent norm around the end of the year). Sustained cattle and beef strength should also provide spillover support for hogs and pork.
Technical analysis: Today’s breakdown gave bearish traders the technical advantage on the December hog chart. The drop took the chart below both its 20- and 10-day moving averages near $75.73 and $75.54, respectively. Those now mark initial resistance. Bears are now likely targeting support at last week’s low of $74.075, then the sloppy double bottom in the $71.275 to $71.775 area established in September and October. Look for stiff resistance between the 40-day MA at $77.48 and the Nov. 4 high at $78.225. A close above that range would have bulls targeting $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: December live cattle rose 10 cents to $132.20, the highest closing price in over two months. Deferred futures ended lower. November feeder cattle fell 67.5 cents to $157.90.
Fundamental analysis: The live cattle futures bulls continue to claw their way higher, led by notions cash market fundamentals have turned the corner and will continue to improve in the coming weeks. Cash cattle trade this week is likely to be steady-weaker, although some trade at $130.00 has occurred early this week, up slightly from last week’s average cash price. 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. Still, feedlots sold large numbers of cattle last week and packers may be reluctant to pay up this week.
Choice beef cutout values early today rose 84 cents to $289.49, near a five-week high. Select grade gained a solid $3.19 and movement was decent by midday, at 107 loads.
In its latest monthly Supply and Demand report, USDA raised U.S. beef production from last month on higher expected slaughter of fed cattle and heavier carcass weights. Cattle price forecasts for 2021 and 2022 were raised on continued firm demand. The 2021 U.S. beef export forecast was raised on recent trade data and continued strong demand from top trading partners. No change was made to the 2022 U.S. beef export forecast.
Technical analysis: The live cattle futures bulls have the overall near-term technical advantage, with a five-week uptrend still intact the daily bar chart. Live cattle bulls' next upside price objective is to close December futures above solid resistance at $135.00. The next downside technical objective for the bears is closing prices below solid technical support at $128.25. First resistance is seen at this week’s high of $132.50 and then at $134.00. First support is seen at today’s low of $131.40 and then at $130.55.
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 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 this week’s high of $158.925 and then at $160.00. First support is seen at $157.00 and then at $156.00.
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.
