Livestock Analysis | September 19, 2022

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Hogs

Price action: October lean hogs fell 42.5 cents to $96.475 after reaching a four-week high earlier. December hogs rose 17.5 cents to $88.15.

Fundamental analysis: Lean hogs fell under profit-taking pressure following last week’s strong gains. Cash hog market fundamentals continued to improve. The CME lean hog index rose 20 cents to $97.97 (as of Sept. 15), the second straight daily gain after a five-week string of losses. Tuesday’s index is expected to rise another 45 cents. October lean hogs finished around $1.50 below the current cash index, a price-friendly factor in light of the sharp narrowing of the discount the past month. The national direct five-day rolling average hog price today was $94.16. Pork cutout values rose $1.79 early today to $108.18, led by gains in bellies. Movement was decent at 209 loads.

An outlook for increased slaughter the next two months may limit longer-term price upside in futures. However, a tighter supply outlook, improved consumer demand for pork and higher beef prices will likely keep a floor under cash and futures prices. Traders await USDA’s quarterly Hogs and Pigs report Sept. 29 for an update on the supply outlook.

Technical analysis: Bulls hold a near-term technical advantage in lean hogs. The next upside objective for bulls is to close October futures above solid resistance at $100.00. The next downside objective for bears is closing prices below solid support at $92.000. First resistance is seen at today’s high of $97.05, then $98.00. First support is seen at $96.00, then $95.00.

What to do: Be prepared to extend feed coverage when market bottoms are in place. 

Hedgers: Carry all risk in the cash market for now.

Feed needs: You are hand-to-mouth on corn-for-feed and soybean meal needs.

 

Cattle

Price action: October live cattle rose 22.5 cents to $145.725, after earlier rising to $146.275, the highest intraday price for a nearby contract since August 2015. October feeder cattle rose $1.05 to $182.30.

Fundamental analysis: October live cattle ended with a modest gain after reaching a five-month high earlier today on expectations for continued cash market strength. USDA-reported live steers averaged $143.19 last week, up from the previous week's average of $142.48. Traders expect cash prices to continue firming this week but buyer interest in futures may be limited until active trade gets underway, which probably won’t happen until midweek or later with USDA reporting its monthly Cattle on Feed update Friday. Slumping wholesale beef prices may limit price upside in futures. Choice beef cutout values early today rose $1.10 to $253.50 but remain near a 17-month low posted Thursday. Feeder cattle gained support from weakness in corn futures.

Technical analysis: Live cattle futures retain a near-term bullish bias with the October contract trending up for nearly three weeks. October futures briefly rose above the Sept. 12 high at $146.10 but failed to close above that price. A close above the Sept. 12 high and the August high of $146.25 may have bulls targeting the contract high of $147.50 posted April 22 and the $150.00 level. Initial support is seen at the 10-day moving average around $145.10, the 20-day moving average at $144.35 and last week’s low at $144.275.

What to do: Be prepared to extend feed coverage when market bottoms are in place.  

Hedgers: Carry all risk in the cash market for now.

Feed needs: You are hand-to-mouth on corn-for-feed and soybean meal needs.

 

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