Livestock Analysis | March 5, 2024
Price action: April lean hogs fell $1.10 to $85.175, nearer the session low and hit a two-week low.
Fundamental analysis: The lean hog futures market today saw some more profit taking from recent gains. Bulls are fading as cash market fundamentals are starting to deteriorate a bit.
The latest CME lean hog index is up another 15 cents to $80.41 as of Mar. 1. The preliminary calculation puts the index up 46 cents to $80.87 tomorrow, which would be the biggest gain since Feb. 21. Traders have reduced the futures premium to the cash index, presently at $4.305, basis the April contract. That calls into question whether the cash index will fall short of the $6.30 rise that seasonally occurs, on average, between now and mid-April. The national direct five-day rolling average cash hog price quote today is $72.78.
The noon report today showed pork cutout value down another $1.24 to $91.58, on a $12.50 drop in bellies. Movement at midday was 154.75 loads.
Technical analysis: The lean hog futures bulls have the overall near-term technical advantage but have faded a bit. A two-month-old uptrend is in place on the daily bar chart, but now just barely. The next upside price objective for the hog bulls is to close April prices above solid chart resistance at the February high of $88.90. The next downside price objective for the bears is closing prices below solid technical support at $82.50. First resistance is seen at today’s high of $86.35 and then at $87.50. First support is seen at today’s low of $84.625 and then at $83.00.
What to do: Get current with feed advice. Carry all production risk in the cash market for now.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have all corn-for-feed and soymeal needs covered in the cash market through March.
Price action: April live cattle futures rallied $1.325 to $188.00 and settled nearer session highs. March feeder futures rallied 75 cents to $252.30.
Fundamental analysis: Live cattle futures retraced most of Monday’s losses as technical support and supportive cash fundamentals underpinned gains. The market has been more conservative in recent days as April approaches and premiums to the cash market remain wide, as February futures went off the board at a substantial premium to last week’s cash average. The market has seen little upside since Feb. 16, especially on a closing basis, as traders wait for the cash market to narrow premiums to nearby futures. Minimal cash trade has taken place thus far this week, though trade has started sharply lower at $178.00 in the southern markets, a far cry from last week’s average of $183.30. Wholesale beef prices were mixed at midsession, as Choice cutout fell $1.14 to $305.16 and Select rose 28 cents to $295.45. The recent uptick in cutout values has boosted packer margins, though they remain in the red. Plants are likely to continue to cut kill hours to manage tight market-ready supplies in the near term.
Nearby feeder futures have fallen under pressure as premiums to the feeder index, which most recently fell 62 cents to $246.38, have become too wide, considering the March contract is in its delivery month. The index has traded mostly sideways since Feb. 13, bringing concerns over current hefty premiums.
Technical analysis: April live cattle futures posted corrective gains following Monday’s selloff. Bulls continue to retain full control of the near-term technical advantage, though bears have capped gains for nearly three weeks. Bulls are eyeing resistance at $188.00, quickly backed by $188.45, the for-the-move high close, then the for-the-move high at $189.20. Meanwhile, support stands at $186.95, the uptrend line stemming from the December low at $186.50, then $185.825, the 20-day moving average.
March feeder futures posted modest gains though have shown relative weakness compared to fats. Bulls continue to hold the technical advantage. Prices appear to be in a bull-flag on the daily bar chart, consolidating for another leg higher. Resistance stands at $252.50 with backing from $253.00 then $254.575. Meanwhile, support comes in at $251.25, the psychological $250.00 mark, then $249.00.
What to do: Get current with feed advice. All production risk in the cash market for now but be prepared for some hedge coverage as we have demand concerns.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You have all corn-for-feed and soymeal needs covered in the cash market through March.
