Break in June Cattle's Uptrend
June live cattle fell $5.77 to $132.52 in the week ended Friday, March 4, the lowest close in four months and confirming a bearish change in trend. Fundamentally, cattle slaughter has increased lately, and packer bidding was more active before last week's surge in grain prices related to fighting in Ukraine pressured cattle and feeder cattle prices lower. Much of last week's selling was probably due to speculative influence as Friday's CFTC data showed noncommercial net longs in live cattle fell from 82,243 to 59,039 in the week ended March 1. It is difficult to know how long the situation in Ukraine will pressure cattle prices, but June futures price trading below last week's cash trade of $140 tends to be a bearish sign.FEEDER CATTLE:
April feeder cattle dropped 7.50 cents to $157.25 in the week ended March 4, the lowest close in eight months. The same week saw May corn jump 98 1/2 cents to $7.54 1/4, the highest May price in nine years as Russian troops shelled Ukrainian cities and raised numerous concerns about Ukraine's prospects for growing and harvesting crops in 2022. Meanwhile, drought remains an ongoing concern in the western U.S. and adds to the difficulty of maintaining herds. Technically, there is a slim chance of support at the November low of $156.15, but feeder prices are clearly under bearish pressure, and it is difficult to say how long the fighting in Ukraine will last and how long the disruption to feed costs will stress this market. One sign the selling in feeders might be overdone is that CFTC data showed noncommercials net short 2,359 contracts as of March 1, a position vulnerable to short-covering.
After trading higher earlier in the week, June lean hogs closed down $2.12 for the week, ending at $111.75 Friday, the lowest close in nearly a month, but also not far from its highest June prices in seven years. On a weekly chart, the weekly stochastic for June hogs turned lower and leaves behind a potential double-top near $123.07. Also last week, May corn was up 98 1/2 cents and May soybean meal was up $17.70, largely related to concerns about how Russia's assault on Ukraine might affect grain production in 2022. Hog prices are high enough to accommodate the higher feed prices but concerns about Ukraine appear to have started a correction in hog prices. Technically, the trend remains up despite last week's sell-off.
Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of grain or grain futures or options involve substantial risk and are not suitable for everyone.
Todd Hultman can be reached at firstname.lastname@example.org
Follow him on Twitter @ToddHultman1
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