Livestock Analysis | October 26, 2021
Price action: December lean hogs fell $1.625 to $72.575, the lowest closing price since $72.25 on Sept. 15. The lead-month contract is down 15% from a two-month closing high at $85.40 on Sept. 30.
Fundamental analysis: Hog futures settled at a six-week low as the market remained under pressure from poor cash fundamentals and the ongoing technical breakdown on the daily charts. Pork cutout values rose 79 cents early today to an average of $95.37 but remain near an eighth-month low of $94.58 reached yesterday. Tomorrow’s CME lean hog index is expected to drop 32 cents to $82.66, which would be the lowest since $82.63 on March 1. Carcasses on national direct markets early today averaged $63.25, down 41 cents. U.S. hog numbers are down from last year and an outlook for even smaller supplies in 2022 may eventually put a floor under futures, but for now, bearish momentum rules the day.
Technical analysis: Lean hog bears have solid near-term advantage, with prices in a steep, three-week downtrend on the daily bar chart. Downside price objectives for bears includes closing December lean hogs below solid support at $71.275, a seven-month low posted Sept. 16. Upside objectives include closing December above last week’s high of $78.75. The stochastics indicator for December futures is around 33, just above the 30 threshold considered “oversold” territory.
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 $1.925 to $131.45, hitting a seven-week high. November feeder cattle rose $1.30 to $159.775.
Fundamental analysis: Continued strength in cash fundamentals boosted cattle futures. Choice cutout values early today rose $2.10 to $285.14, the highest in three weeks. Select grade dipped 4 cents and movement was 66 loads at midday. It’s expected that cash cattle prices will trade steady to firmer this week as the feedlot operators may be gaining some ground on the packers. There are reports of cash cattle $124 bids in the southern regions and $126 in the north. Dressed steer weights are also on the decline, which is a positive. Today’s cattle slaughter is estimated at 122,000 head, compared to 121,000 last Tuesday and 119,000 one year ago at this time.
Feeder cattle futures were boosted by the strength in live cattle and despite the good gains in corn futures prices today. The unexpected decline in September feedlot placements USDA reported last week should act as a bullish longer-term factor, signaling smaller beef supplies in 2022.
Technical analysis: Today’s solid gains restarted a price uptrend on the daily bar chart for December live cattle, and market bulls have gained an overall near-term advantage. Live cattle bulls' next upside price objective is to close December futures above solid resistance at $134.00. The next downside technical objective for the bears is closing December below solid technical support at $127.00. First resistance is seen at $132.00 and then at $133.00. First support is seen at $130.90 and then at today’s low of $129.20.
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 $155.00. First resistance is seen at this week’s high of $159.90 and then at $161.00. First support is seen at today’s low of $157.925 and then at last week’s low of $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.
