Livestock Analysis | September 26, 2022
Price action: December lean hogs fell $3.40 at $79.40, the contract’s lowest closing price since late January.
Fundamental analysis: Hog futures were pressured by deteriorating cash fundamentals and heightened recession concerns. Today’s CME lean hog index fell 42 cents to $97.59 (as of Sept. 22), and tomorrow’s reading is expected to drop another 60 cents. October hogs are currently $7.215 under the cash index, suggesting traders expect more near-term pressure on the cash market. The national direct five-day rolling average cash hog price today is quoted at $93.30. Wholesale pork rebounded from a recent slump early today but remain near a four-month low. Pork cutout values rose 64 cents to $101.57 by midday, led by bellies. A soaring U.S. dollar also pressured livestock markets, raising concern over demand for dollar-denominated commodities.
USDA on Thursday will release its quarterly Hogs and Pigs Report. Some analysts expect USDA to report the smallest Sept. 1 hog inventory in five years, a reflection of ongoing herd contractions. The report will likely set the futures market’s tone for October.
Technical analysis: Hog futures bears have gained a near-term technical advantage as prices extended a steep one-week slide. The next upside objective for bulls is to close December futures above solid resistance at today’s high of $83.325. The next downside objective for bears is closing prices below solid support at $73.00. First resistance is seen at $80.00, then $81.00. First support is seen at today’s low of $78.40, then $77.00.
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.
Price action: December live cattle fell $1.20 to $147.35, the contract’s lowest closing price since July 21. November feeder cattle fell $1.20 to $177.05, the lowest close since June 14.
Fundamental analysis: Live cattle futures ended at the lowest levels in over two months as intensifying concern over a potential global recession weighed on agricultural commodities. Tight animal supplies remain a long-term supportive factor, but near-term fundamentals lean bearish with the summer grilling season over and economic uncertainty crimping beef demand. Futures weakness suggests a recent upturn in cash cattle may be short-lived with packers disinclined to raise bids. USDA-reported live steers averaged $144.94 last week, up from the previous week’s $143.19 average and the second consecutive weekly increase.
Wholesale beef extended a recent slide with retailers appearing to be buying less and packers cutting prices to move product. Choice beef cutout values remain near an 18-month low, as the benchmark fell 7 cents early today to $248.56, the lowest daily average since late March 2021. USDA’s monthly Cattle on Feed update Friday was mildly bearish for live cattle futures. USDA reported the Sept. 1 feedlot inventory at 0.4% over the same date a year earlier, while placements during August rose 0.4%, contrary to expectations for a drop of about 2.7%. Marketings during August climbed 6.4%.
Technical analysis: Live cattle technicals are growing increasingly bearish as the December contract dropped under the August low and settled under its 100-day moving average, currently $147.80, for the first time since July 21. Bears may now be targeting the July low at $143.95 and the May low at $142.025. Initial resistance is seen at today’s high of $149.60, which is also around the 10-day moving average, and further at the 20-day moving average just under $150.00.
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.
