Livestock Analysis | April 13, 2023
Price action: Expiring April lean hog futures fell 70 cents to $71.60. Most-active June futures settled at $85.65, $1.90 lower on the day.
Fundamental Analysis: Lean hog futures continued their decline today, making new lows in the April and June contracts. The further price gets pressured lower, the more aggressive the seasonal reversal will be once buyers step into the market. As expected, the hog index for Tuesday is officially quoted at $72.25, down 27 cents. Wednesday’s preliminary quote is $71.95, down another 30 cents. This pushes the index below the Jan 2023 low to levels not seen since Jan 2022, which came off a bounce from the Nov 2021 low of $70.04 that lead to an aggressive rally in the following months.
Pork cutout ended Wednesday strong and those gains continued into this morning’s report, rising 59 cents at midsession Thursday to $76.61. Gains were steady across the board apart from loins and ribs. The surge spurred by the grilling season should continue to lift wholesale prices as spring is underway. Exports came in weaker than the last few weeks with sales of 27,100 MT for 2023 being down 49 percent from the previous week and 31 percent from the prior 4-week average
Technical Analysis: June lean hog futures hit a fresh low after gapping lower this morning. Bears remain firmly in control of the near-term technical advantage, targeting a daily close below $85.00 support. The daily continuation chart shows additional support at $83.50, then significant support at the psychological $80.00 level. Bulls are targeting a daily close above the 10-day moving average, currently residing at $89.10, for the first time since Mar 13. Additional resistance will come in at $90.50, backed by $92.25.
What to do: Get current with advised feed coverage. Be prepared to extend coverage on additional price pressure.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all soymeal needs covered in the cash market through May. You have all corn-for-feed needs covered in the cash market through mid-April.
Price action: Nearby April live cattle spiked to a fresh record high for nearby cattle at $177.70 before setting back slightly to a fresh record high close, up $1.225 to $175.50. Most-active June cattle set back 35 cents to close at $164.50. May feeder futures suffered a late 77.5 cent drop to close at $207.80.
Fundamental Analysis: The fed cattle situation has become very tight, as indicated by the latest steer dressed weight figure at 898 pounds per head falling 11 pounds below year-ago levels and the spread between choice- and select-grade beef values widening to $17.15 at midsession Thursday. The latest quotes for cash cattle and beef point in the same direction. Indeed, after surging to a fresh all-time high of $173.10 last week, the Monday-Wednesday average for the five-direct-market area leapt to $179.09 this morning. Choice cutout climbed to $300.40 late this morning, marking just the fourth time it’s topped $300.00. We expect continued short-term strength in both cash and wholesale values, which should provide sustained support for nearby futures, although traders anticipating a short-term cash market peak in the days ahead caused most contracts to move lower on the day.
Grain market slippage offered fresh support for feeder futures as traders anticipated reduced feed costs, but the yearling market also turned lower on bearish seasonal expectations for fed cattle.
Technical Analysis: Bulls still hold the short-term technical advantage in June live cattle futures, but a significant portion of traders clearly doubt the recent advance can be sustained. That’s best illustrated by the contract’s Thursday opening at $165.75 and low-range close. Look for initial resistance at the daily open, with backing from the high at $167.70. Bulls are likely targeting the $170.00 level. Initial support extends from Tuesday’s high of $164.525 to today’s low at $164.425. A drop below that area would have bears targeting the 10-day moving average near $162.50, then the 40-day moving average near $159.90.
Although bulls also appear to hold the short-term technical advantage in May feeder futures, today’s action looked quite negative after an opening jump to $209.80 and the sizeable closing loss. Look for initial support extending down to from Tuesday’s high at $207.95 to yesterday’s low of $207.675 and today’s bottom at $207.55. A drop below that range would open the door to a test of the 10-day moving average near $205.27 and the 40-day moving average near $201.09. Initial resistance at Wednesday’s high of $209.40 is backed by today’s high at $210.15. A breakout above the latter point would have bulls aiming for the psychological $215.00 level.
What to do: Get current with advised feed coverage. Be prepared to extend coverage on additional price pressure.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all soymeal needs covered in the cash market through May. You have all corn-for-feed needs covered in the cash market through mid-April.
