Livestock Analysis | March 20, 2024

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: April lean hog futures lost 52.5 cents to $85.30, settling nearer session lows.

Fundamental analysis: Lean hog futures fell under pressure for the second consecutive session as skepticism about the longer-term outlook persists. After showing relative strength most of this morning, deferred contracts fell lower, led by weakness in the May and June contracts. We maintain a more optimistic outlook, as an early start to the grilling season and relatively tight belly stocks are likely to support wholesale pork this spring and into summer. As inflation continues to weigh heavily on consumers and beef prices are high, grocers are likely to actively feature pork as an alternative to beef, keeping demand for pork high and underpinning the hog market. The CME lean hog index is up another 28 cents to $82.82 today (as of Mar. 18) and the preliminary calculation puts the index up another 39 cents to $83.21. That would narrow the premium that April futures hold to the index to just $2.09. Still, futures are likely to maintain a premium over the coming month, despite some day-to-day fluctuations, though the downturn in deferred futures is more concerning, especially if weakness persists in the coming days.

The weakness seen in wholesale pork values this morning likely helped fuel the selling seen in futures. Cutout fell 99 cents to $92.38, which would be the lowest mark in a week if losses persist this afternoon. Ribs and bellies led the way lower this morning. Movement firmed to an impressive 183.25 loads though, indicating strong retailer demand.

Technical analysis: April lean hog futures closed lower for the second consecutive session. Bulls continue to hold the near-term technical advantage, though prices have formed a series of lower highs and lower lows on the daily bar chart. Resistance stands at the 10-day moving average at $85.60, which is backed by $86.925 then the for-the-move high close at $88.075. Meanwhile, bulls are seeking to defend support at the 20-day moving average, currently at $85.25, which is backed by $84.75 then last week’s low of $83.15.

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 should have all corn-for-feed and soymeal needs covered in the cash market another month through April.

 

 

Cattle

Price action: Cattle futures slipped Wednesday, with the nearby April live cattle contract dipping 25 cents of $187.80. The expiring March feeder cattle contract dropped 42.5 cents to $250.25, while next-nearby April slid 15 cents to $254.925. 

Fundamental analysis: The cattle industry is less optimistic about the price outlook in the wake of last week’s final weekly slaughter report for the week ended March 2, since the report indicated steer dressed weights had averaged 919 pounds per head. That was up five pounds from the week prior, whereas the seasonal norm is for sustained declines in late winter and early spring. Given the gains posted over the previous three weeks, the latest rise put the latest reading 20 pounds over the comparable year-ago figure, implying feedlot marketings are lagging.

The weight increases are more likely the result of extremely slow packer operations (and very mild February-March weather over the Great Plains) rather than producers being unwilling to move cattle in a timely manner. This is partially reflected by the ongoing advance in wholesale beef prices. Choice cutout did slip 11 cents to $313.22 at noon today, while select cutout edged up 13 cents to $303.18. Those gains apparently reflect tight supplies, as well as sustained demand firmness from consumers. Nevertheless, history indicates such a large year-to-year increase in steer weights is not conducive to sustained cash market gains. We are concerned cash prices might have reached an early seasonal peak last week. A bearish Cattle on Feed report issued after Friday’s close might trigger a downturn. There was virtually no cash trading Monday or Tuesday.

Given the March feeder cattle contract’s sizeable premium to the CME feeder index last week, it would have been easy to assume it was overpriced. However, the index has surged in the wake of last week’s fed cattle advance, with the latest index quote reaching $251.02. Today’s decline implies traders expect a downturn by next Thursday’s (3/28) March futures’ expiration.

Technical analysis: Bulls still own the short-term technical advantage in April live cattle futures, but that has diminished as the market has essentially traded sideways over the past month. Today’s close at $187.80 left the market between initial support at the 20-day moving average near $187.65, but under initial resistance at the 10-day moving average near $188.08. Today’s low and high mark secondary support and resistance at $187.40 and $188.575, respectively, with tertiary support and resistance respectively represented by the recent low and high at $186.65 and $190.275. Major support persists at the 40-day moving average near $185.85, whereas a breakout above last week’s high could open the door to a test of the $195.00 level.

Bulls also hold the short-term technical advantage in April feeder futures. Support extends from the 20-day moving average near $255.60 to the 40-day moving average near $252.61. A drop below the latter point would have bears targeting the psychologically important $250.00 level. Initial resistance at the 10-day moving average near $254.19 is reinforced by the downtrend line drawn across the contract’s March 8 high at $258.325 and the Feb. 27 high at $260.65. A bullish breakout would likely have bulls looking to test those highs.

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 should have all corn-for-feed and soymeal needs covered in the cash market another month through April.

 

 

 

Latest News

H&P Report negative compared to pre-report expectations
H&P Report negative compared to pre-report expectations

Nearly every category topped the average pre-report estimates.

After the Bell | March 28, 2024
After the Bell | March 28, 2024

After the Bell | March 28, 2024

Pro Farmer's Daily Advice Monitor
Pro Farmer's Daily Advice Monitor

Pro Farmer editors provide daily updates on advice, including if now is a good time to catch up on cash sales.

PF Report Reaction: Bullish USDA data for corn
PF Report Reaction: Bullish USDA data for corn

Corn planting intentions and March 1 stocks came in lower than expected.

Report Snapshot: USDA shows lighter-than-expected corn acres and stocks
Report Snapshot: USDA shows lighter-than-expected corn acres and stocks

USDA reported corn acres of 90.036 million acres for 2024 and March 1 stocks of 8.347 billion bu., both well below trade estimates. Soybean acres were slightly lower than expectations, while stocks were higher.