Livestock Analysis | March 11, 2024
Price action: April lean hogs fell $1.10 to settle at $83.275, the lowest close in nearly a month.
Fundamental analysis: Lean hog futures saw action on both sides of unchanged today but faced steady selling pressure into the close. Traders anticipated a break in the seasonal strength in the CME lean hog index and were vindicated as today’s quote was unchanged from Friday at $81.48. The preliminary calculation puts the index down 7 cents to $81.41 tomorrow (as of Mar. 8), marking the first daily decline in the index since Feb. 8. Price action in April futures is likely to be largely dictated by cash fundamentals. Strength in cutout helped limit losses at midsession, though concern over the near-term outlook as the index has seen a pause in the seasonal bounce weighed heavily on futures into today’s close.
Wholesale pork prices likely played a role in the mid-morning bounce as cutout surged at midsession. Cutout rose $3.65 to $95.76, posting gains in each individual cut. If sustained in afternoon trade, that would put cutout at the highest mark since early October, as prices were falling seasonally.
Technical analysis: April lean hog futures led the way lower today. Bears are garnering additional momentum and are attempting to render full control of the near-term technical advantage. Bulls are seeking to claim resistance at $84.7125, the 20-day moving average, to resume the uptrend on the daily bar chart. Additional resistance stands at $84.375 on the way, though bulls are ultimately seeking to overcome resistance at $86.00. Support stands at $83.30, the 40-day moving average, which capped losses today. Further support stands at $82.00.
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 closed steady at $187.60. May feeder cattle fell $1.375 to $255.375. Prices closed near mid-ranges.
Fundamental analysis: The live cattle futures market saw some more chart consolidation today, while the feeder futures were pressured by more gains in the corn market, which is now showing technical signs of a market bottom being in place. Last week’s cash cattle average was $185.12, up $1.82 from last week. We look for at least steady cash cattle trading this week, as market-ready supplies of animals in the feedlots are still tight.
The noon report today showed wholesale beef cutout values mixed, with Choice up $1.48 to $308.52, while Select was down 21 cents to $297.22. That’s the highest price for Choice-grade beef since late October of last year, while Select-grade Friday hit the highest since late June of 2023. Packer margins have improved lately but remain in the red.
Cattle futures traders will closely watch Tuesday morning’s consumer price index report for February. Recent CPI readings have shown generally receding inflation, which has boosted consumer confidence and in turn improved beef demand at the meat counter. A warmer-than-expected CPI reading Tuesday morning could at least temporarily deflate the cattle market bulls.
Technical analysis: The live cattle futures bulls have the overall near-term technical advantage. A three-month-old price uptrend is in place on the daily bar chart. The next upside price objective for the bulls is to close April futures above solid resistance at $190.275, which is the top of a price gap formed on the daily bar chart last October. The next downside technical objective for the bears is closing prices below solid technical support at $184.475. First resistance is seen at $190.275 and then at $192.00. First support is seen at last week’s low of $186.55 and then at $185.00.
The feeder cattle futures bulls still have the overall near-term technical advantage but are fading a bit. A three-month-old uptrend on the daily bar chart has stalled out. The next upside price objective for the feeder bulls is to close May futures prices above technical resistance at the February high of $263.125. The next downside price objective for the bears is to close prices below solid technical support at $250.675. First resistance is seen at $257.00 and then at $259.00. First support is seen at $254.525 and then at $253.00.
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.
