Livestock Analysis | April 25, 2024
Price action: Hog futures slumped in the wake of Wednesday’s USDA Cold Storage report. June hog futures dove $2.45 to $105.00.
Fundamental analysis: Wednesday’s USDA Cold Storage Report proved surprisingly bearish for the hog outlook, due primarily to the rise in stockpiles, whereas a reduction often occurs during March. Ham stocks declined little, implying grocers did not feature hams aggressively for Easter dinner entrees and consumers seemingly didn’t pay up for them. Moreover, pork belly stocks surged last month, when a very modest rise in more common. The results didn’t seem terribly bearish for the spring and early-summer outlook, since the industry is largely focused on the various grilling cuts (i.e. chops, pork steaks, ribs and trimmings) during the grilling season. But the surge in belly stocks to well above year-ago and five-year average levels implies no shortage of bacon for BLT season, especially if USDA analysts are correct in anticipating a modest year-to-year increase in hog supplies. Thus, mid-to-late summer price prospects have diminished. The ham stocks figure also suggests no looming shortage of holiday dinner entrees late this year.
Sellers were likely responding to the latest cash and wholesale news as well. After Tuesday’s hog index quote was officially stated at $91.64 this morning, Wednesday’s preliminary figure came in 21 cents lower at $91.43. And after diving Tuesday and bouncing only slightly yesterday, pork cutout edged up just 35 cents to $97.62 this morning.
Technical analysis: Today’s drop damaged the short-term technical outlook, but bulls still hold the advantage in June lean hog futures. Expect support to be layered between the contract’s 20-day moving average near $104.88, today’s low at $104.375 and the 10-day moving averages near $104.35. Look for stronger support at the 40-day moving average near $103.11. Today’s high marked initial resistance at $106.90, with backing from Tuesday’s top at $108.55, then the April 10 high at $109.65
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: Extend soymeal and corn-for-feed coverage another four weeks in the cash market through May.
Price action: June live cattle rose $2.55 to $177.80. May feeder cattle futures gained $2.15 at $246.25. Prices closed near their session highs today.
Fundamental analysis: The live and feeder cattle futures markets rebounded smartly from Wednesday’s losses and the bulls are having a good week. The cattle market bulls were able to push prices solidly higher today despite some bearish macro-economic news. U.S. GDP expanded at an annualized 1.6% in the first quarter, well below the 3.4% gain in the previous quarter and below market expectations.
Bulls also today brushed aside some uncertainty in the cattle markets regarding the H5N1 virus. Colombia blocked some fresh/frozen beef and beef products from cattle slaughtered on or after April 15 in Idaho, Kansas, Michigan, New Mexico, North Carolina, Ohio, South Dakota and Texas. Those states have detected the H5N1 virus in dairy cattle. USDA’s Food Safety and Inspection Service (FSIS) said the restrictions are temporary.
Cash cattle trading began in the southern Plains Wednesday, with fed steers averaging around $182.00 in Texas, Oklahoma and Kansas. Little trading has occurred in the north so far this week, with a few head changing hands at $183.00 in the Iowa-southern Minnesota region. Producers in the north are likely going to hold out for $183.00 or $184.00, and given today’s futures gains, they might get it. The noon report today showed wholesale beef prices mixed, with Choice grade up $1.68 to $297.42, while Select cutout fell 42 cents to $290.00. Movement at midday was 57 loads. The Choice-Select spread is presently $7.42.
USDA this morning reported U.S. beef sales of 15,200 MT for 2024, down 14% from the previous week and 3% from the four-week average, but the Wednesday’s Cold Storage report indicated consumer beef demand remains solid.
Technical analysis: The live and feeder cattle futures bulls and bears are on a level overall near-term technical playing field. The next upside price objective for the live cattle bulls is to close June futures above solid resistance at $182.50. The next downside technical objective for the bears is closing prices below solid technical support at the April low of $170.25. First resistance is seen at this week’s high of $178.80 and then at $180.00. First support is seen at $176.00 and then at $175.00. The next upside price objective for the feeder cattle futures bulls is to close May futures prices above technical resistance at $250.00. The next downside price objective for the bears is to close prices below solid technical support at $237.50. First resistance is seen at this week’s high of $246.975 and then at $248.00. First support is seen at this week’s low of $243.00 and then at $242.00.
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: Extend soymeal and corn-for-feed coverage another four weeks in the cash market through May.
