Livestock Analysis | October 4, 2022
Price action: December lean hog futures plunged $3.30 to $74.425, the contract’s lowest closing price since Dec. 9.
Fundamental analysis: Hog futures plunged to 10-month lows amid slumping technicals, weakness in cash fundamentals and concern over near-term pork demand. Despite ongoing herd contraction, as illustrated by smaller than expected numbers in USDA’s quarterly Hogs & Pigs report last week, the market’s near-term sentiment is decidedly bearish amid expectations for seasonal cash weakness. Today’s lean hog index fell 58 cents to 94.33, the lowest since February. Today’s futures plunge sent the October contract $7.33 under the index (the next preliminary figure is not yet available due to packer submission problems). Pork cutout values rose 5 cents to $99.98 early today. Bears may think ham prices are vulnerable to a big decline in the coming weeks, but be aware several outbreaks of avian influenza in the domestic population may significantly reduce turkey supplies for the holiday season.
Technical analysis: Bears hold a strong short-term technical advantage in December hogs, especially if today’s price action starts of a followthrough dive signaled by a “bear flag” formation on the daily chart. That suggests a downside target in the $67.00 area. Today’s low placed initial support at $72.975, with a drop below that level opening the door to a test of $70.00. Today’s failure at the 10-day moving average puts initial resistance around the $79.05-$79.15 level. A push back above that area would have bulls targeting the mid-September low at $81.35, then the 40-day moving average near $84.07.
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 fell 52.5 cents to $147.50. November feeder cattle dropped 85 cents to $175.20.
Fundamental analysis: Cattle futures fell amid concern over demand as an ongoing slump in wholesale beef indicates packers are slashing prices to keep product moving. The cash trade outlook is also providing little inspiration for buyers. Cash trade later this week is expected to be around steady. Last week’s average steer prices fell 16 cents to $144.78. Demand for cattle remains strong, however, suggesting a solid floor underneath cash and futures markets. Choice beef cutout values rose $2.88 early today $248.82.
Technical analysis: Live and feeder cattle futures bears hold a near-term technical advantage. Live cattle bulls' next upside objective is closing December futures above solid resistance at $151.00. The next downside objective for bears is closing prices below solid support at the July low of $143.95. First resistance is seen at this week’s high of $148.70, then at $150.00. First support is seen at $146.80 and then at $146.00.
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.
