Livestock Analysis | April 24, 2024
Advice: We advise livestock producers to extend soymeal and corn-for-feed coverage another four weeks in the cash market through May.
Price action: June lean hog futures slipped 50 cents to $107.45 and settled near mid-range, while May futures sunk $1.225 to $97.35.
Fundamental analysis: Lean hog futures opened lower this morning though they quickly pared losses, closing modestly lower on the session and trading within Tuesday’s range. Lean hog futures were dragged lower by weakness in the cattle market today, which closed lower for the second consecutive session. Traders were apparently discouraged by steep losses in the wholesale market on Tuesday, which saw cutout falling $4.81, led lower by a $23.70 drop in bellies. Despite that steep drop, bellies continued modestly lower today, though gains in loins and hams offset belly losses, raising whole cutout $1.41 to $98.30 at midsession today. The CME lean hog index is up 14 cents to $91.45 as of April 22, ending a modest 15-cent slide. The preliminary calculation puts the index up another 19 cents to $91.64 tomorrow, which would mark a fresh for-the-move high.
Traders will eye the monthly USDA Cold Storage report this afternoon. Pork stocks dropped contra seasonally in February, falling 6.8 million lbs. while the five-year average indicated a 29.7-million-lbs. increase for the month. The five-year average for March is a 10.3-million-lb. drop in pork stocks.
Technical analysis: June lean hog futures turned lower this morning, failing to garner any bullish momentum above yesterday’s close. Still, prices closed higher from this morning’s open and bulls retain full control of the near-term technical advantage. Initial resistance stands at Tuesday’s high at $108.55 which coincides with the for-the-move high close made on April 9 at $108.575. Further buying targets the contract high of $109.65 and the psychological $110.00 level. Initial support stands at today’s low of $106.80 then $105.925, with firmer backing from the 10-day moving average at $105.35.
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: NEW ADVICE -- Extend soymeal and corn-for-feed coverage another four weeks in the cash market through May.
Advice: We advise livestock producers to extend soymeal and corn-for-feed coverage another four weeks in the cash market through May.
Price action: Cattle and feeder futures turned lower Wednesday, with expiring April live cattle futures falling $1.25 to $182.10, while most-active June futures tumbled $1.90 to $175.25. April feeder futures slid 65 cents to $243.10 and May feeders dropped $1.950 to $244.10.
Fundamental analysis: Although the latest fundamentals seem somewhat more supportive of the short-term price outlook than was recently the case, cattle and feeder futures suffered significant losses Wednesday. This may partially represent a reversal from Monday’s bullish reaction to last Friday’s Cattle on Feed report. The drop came despite news of firm cash prices in Kansas on Tuesday. A 324-head lot of steers changed hands at $182.00, which was steady with the week-prior average. We have harbored some ideas the cash market is set to stabilize, due in part to cattle slaughter topping comparable Easter holiday-diminished kill totals during the first two weeks of April. On the other hand, last week’s slaughter topped the year-ago figure by 3.6%. The sizeable futures losses may cause fresh cash market slippage later in the week.
Beef cutout values gave back their Tuesday gains at noon today, with Choice cutout remaining well below the $300.00 level. This may presage further late-April wholesale weakness since grocers have likely gathered supplies needed to back planned early-May beef features. Conversely, they will likely prove quick to get back into the market as they build inventories for features planned over Memorial Day weekend.
Feeder futures clearly followed fed cattle lower, but bears may have little success in forcing further short-term losses due to the latest cash news. That is, after turning lower in late March, then stabilizing lately, the latest quote for the CME feeder index rose $1.11 to $243.22 Tuesday afternoon. Thus, the April contract, which expires at noon tomorrow, ended the day slightly below par.
Technical analysis: Although today’s price action undercut their position, bulls still seem to hold the short-term technical advantage in June live cattle futures. Bears’ inability to force a close below solid initial support at the contract’s 10-day moving average near $175.18 favors bulls, although the contract did close below its 20-day moving average at $175.35. Additional support is marked by recent lows at $173.75, $171.40 and $170.25. Today’s high marked initial resistance at $177.675, with strong backing in the range between Tuesday’s high at $178.65 and the 40-day moving average near $179.36. Psychological resistance stands at $180.00.
Bulls also seem to hold the short-term technical advantage in May feeder futures, although the contract is priced between areas of strong support and resistance. Expect stiff resistance near the highs of the past three sessions (between $246.35 and $246.975), with formidable backing from the 40-day moving average near $249.19 and the psychological $250.00 level. Initial support at today’s low of $246.65 is backed by support extending from the bottom of Monday’s chart gap (last Friday’s high) at $243.175 to the contract’s 20- and 10-day moving averages at $241.69 and $241.16, respectively. Psychological support also stands at $240.00.
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: NEW ADVICE -- Extend soymeal and corn-for-feed coverage another four weeks in the cash market through May.
