Livestock Analysis | October 3, 2022
Price action: December lean hogs rose $1.50 at $77.725, after earlier reaching $78.325, the contract’s highest intraday price since Sept. 27.
Fundamental analysis: Hog futures were supported by corrective buying and short covering in the wake of steep losses late last month. Supportive outside markets, including U.S. equities and crude oil, also supported ag commodities. But overall weakness in cash market fundamentals likely will limit upside in futures. The CME lean hog index fell 23 cents to $94.91, the lowest since mid-February. Tuesday’s projected index is down another 58 cents at $94.33. The national direct five-day moving average cash hog prices today was quoted at $88.12. October hogs closed just at over a $6.00 discount to the cash index, suggesting traders look for still more cash hog price weakness in the near term. Pork cutout values early today rose $5.39 to $102.98, led by a gain of $23 in bellies. Movement strong at 164 loads.
Longer-term hog market fundamentals lean bullish due to ongoing herd contraction, as illustrated by USDA’s quarterly Hogs & Pigs report last week. USDA estimated the U.S. hog herd at 73.8 million head as of Sept. 1, down 1.4% from a year earlier and down more than expectations for a 0.8% decline.
Technical analysis: Hog futures bears hold a firm near-term technical advantage given the recent steep downdraft. The next upside objective for hog bulls is to close December futures above solid resistance at $83.325. The next downside objective for bears is closing prices below solid support at $73.00. First resistance is seen at today’s high of $78.325 and then at $80.00. First support is seen at $76.50 and then at the September low of $75.325.
What to do: Get current with advised soymeal coverage. Be prepared to extend coverage on additional price pressure.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have 50% of October and 50% of November soybean meal needs covered in the cash market. You are hand-to-mouth on corn-for-feed needs.
Price action: December live cattle rose 97.5 cents to $148.025, the contract’s highest closing price since Sept.23. November feeder cattle rose $1.425 to $176.05.
Fundamental analysis: Live cattle futures saw little follow-though selling from Friday’s declines and climbed on corrective buying and short covering as strength in outside markets like crude oil and U.S. equities supported ag commodities. Eroding cash fundamentals may limit price upside this week, with cash trade likely heading for a steady-at-best week depending on futures’ direction. Choice boxed beef values rose $1.38 early today to $245.13, but remain near the lowest level since March 2021, reflecting slower retailer demand after the summer grilling season. Until wholesale beef prices stabilize, packers may be reluctant to raise cash bids, despite tightening market-ready supplies. USDA-reported live steers averaged $144.66 through Friday morning, down from the previous week's $144.94 average.
Technical analysis: Live cattle futures retain a neutral to slightly bearish technical posture after the losses late last month, but could trend sideways to firmer in coming days until corrective buying runs its course. December live are still trading well below many short- and medium-term moving averages and would need to move back above $149.00 or higher to sustain upside gains and restore bullish momentum. Initial resistance comes in at today’s high at $148.70, followed by 20- and 40-day moving averages around $149.50 and $149.80, respectively. Initial support is seen at the 100-day moving average around $147.70, followed by Friday’s low at $146.80 and a two-month intraday low of $145.75, posted Sept. 29. A push under the Sept. 29 low would have bears targeting $145.00, then $140.00.
What to do: Get current with advised soymeal coverage. Be prepared to extend coverage on additional price pressure.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have 50% of October and 50% of November soybean meal needs covered in the cash market. You are hand-to-mouth on corn-for-feed needs.
