Livestock Analysis | October 21, 2021
Price action: December lean hog futures fell $2.825 to $73.20 today, the lowest closing price since $72.25 on Sept. 15. The contract is down 6.5% so far this week.
Fundamental analysis: Hog futures extended a technically-driven sell off to close at the lowest level in over five weeks. Weak cash fundamentals continued to hang over the market. Pork cutout values rose $7.95 early today to $104.82, led by a $47 gain in bellies. Movement was 150.20 loads by midday. The national direct cash hog price was down $1.02 and the five-day rolling average price was $66.40. The latest CME lean hog index fell 74 cents to $85.89, the lowest since early March. Today’s hog slaughter is estimated at 479,000 head compared to 477,000 last Thursday and 487,000 one year ago at this time.
In other bearish signs, USDA today reported net weekly U.S. pork sales of 20,900 MT, down 38% from the previous week and down 36% from the four-week average.
Technical analysis: Lean hog bears have the solid overall near-term technical advantage and gained more power today. Prices are in a steep three-week-old downtrend on the daily bar chart. The next upside price objective for the hog bulls is to close December prices above solid chart resistance at this week’s high of $78.75. 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 $75.00 and then at today’s high of $75.775. First support is seen at $73.00 and then at $72.00.
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 cattle fell 97.5 cents to $129.55 per hundredweight, down from $130.975 at the end of last week. November feeder cattle fell 27.5 cents to $159.075.
Fundamental analysis: Cattle futures were pressured by a broad commodity market selloff that included grains and crude oil, but declines were limited by firmer cash markets and signs of stabilization in wholesale beef. Choice cutout values rose 44 cents early today to an average of $280.47, up from a 2 1/2-month low last week. On cash markets, live steers were bringing slightly over $124.00, according to some reports. USDA reported net U.S. beef sales totaling 7,800 MT for the week ended Oct. 14, a marketing-year low and down 51% from the previous four-week average. Japan and China were prominent buyers.
Tomorrow’s USDA Cattle on Feed Report tomorrow is expected to show feedlot operators boosted placements for the second straight month. Feedlot placements in September rose an estimated 1.4% from the same month a year earlier, based on a Reuters survey of analysts. The number of cattle on feed as of Oct. 1 is expected to be down 0.6% from a year earlier.
Seasonal patterns imply a tendency for fourth-quarter cattle market strength, with diminished fed cattle supplies and intermittent bursts of beef buying from grocers. Concerns include high retail meat prices crimping consumer demand and lagging feedlot marketings.
Technical analysis: Today’s drop below $130 gives bears a technical advantage, but the fact that they couldn’t force a close significantly below the 40-day moving average at $129.56 suggests they don’t have everything going their way. Look for additional support in the area extending from the 20-day moving average near $128.80 to the September 8 low at $128.575. Bears will be looking to challenge the October 1 low at $125.00. The $130 level is now initial resistance, backed by Tuesday’s high at $131.125. A push above that level would have bulls targeting $132.40.
November feeder futures remained bounded between the contract’s 20- and 40-day moving averages. Support at the 20-day moving average near $158.50 is backed by the September 20 low at $154.825 and by the September 30 low at $152.00. Initial resistance is represented by the 40-day moving average at $160.39, with backing from last week’s high at $162.475. A close above that level would have bulls targeting the $165.00 area.
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.
