Livestock Analysis | April 24, 2023

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Price action: May lean hog futures rallied $1.275 to settle at $87.35.

Fundamental analysis: Lean hog futures continued Friday’s bounce as short profit taking continues. Until grocers choose to pass wholesale savings on to the consumer, demand is likely to remain limited, putting a cap on the market. It is just a matter of time before the relative cheapness of pork compared to beef attracts additional demand, which paired with the increased export demand will help drive a seasonal spring rally that is coming later than normal.

The lean hog index confirmed Thursday’s preliminary quote of $71.31, making a new-move-low in the cash market. Friday’s preliminary quote came in another 12 cents lower at $71.19. Wholesale prices also slid this morning after the recent rally back over $80. Carcass prices fell 13 cents to $80.30 with mixed prices across cuts, although movement was light at 130 loads.

Technical analysis: June lean hog futures saw additional corrective buying today, bringing prices out of recent oversold conditions. There was some selling off intraday highs, but price closed right on the 10-day moving average, which has capped all upside since March 14th. This will be an important pivot going into tomorrow, with confidence of a potential low if price manages to close higher. If bulls are able to continue higher tomorrow morning, they can expect resistance at $88.75, coinciding with last week’s high and the 20-day moving average. Once price does exit the steep recent downtrend, corrective moves higher can turn explosive with little warning. If price rejects lower once again, support can be found at the contract low of $84.625, although a new contract low would be likely.

What to do: Get current with advised feed coverage. Be prepared to extend coverage on additional price pressure.

Hedgers: Carry all risk in the cash market for now.

Feed needs: You should have all soymeal needs covered in the cash market through May. You are hand-to-mouth on corn-for-feed needs.

 

 

Cattle

Price action: June live cattle gained 2 1/2 cents to $164.55, closing near the session high. May feeder cattle closed down $1.65 at $210.75 and nearer the session high.  

Fundamental analysis: The cattle futures markets today digested a mildly bearish USDA monthly Cattle-on-Feed report out last Friday afternoon. It showed an April 1 feedlot population of 11.612 million head (down 4.4% from a year ago) but above expectations. March placements were down 13,000 head (0.6%) from last year, but pre-report estimates averaged 5.2% under March 2022. March feedlot marketings were 1.15% under the comparable year-ago figure, in line with market expectations. However, the data still showed a year-over-year decline in feedlot inventories for a seventh straight month. Some traders are wondering if the cattle markets have posted highs for the year. A seasonal high during spring is not uncommon. However, the current tight supply of market-ready animals, as indicated by steer weights 20 pounds under year-ago levels, suggests the downside in cash and futures prices is likely to be limited. Retailers are likely to be buying aggressively for Memorial Day features through the first half of May.

Last week’s cash cattle trade averaged $178.57 down $1.87 but the second-highest level ever. The noon beef report today showed Choice grade up 25 cents at $306.85, with Select grade up $1.26 at $289.06, taking the Choice/Select spread to $17.79. Movement at midday was light at 28 loads.

Technical analysis: The live and feeder cattle futures bulls still have the firm overall near-term technical advantage. Prices are in uptrends on the daily bar charts. Live cattle bulls' next upside price objective is to close June futures prices above solid resistance at $168.00. The next downside technical objective for the bears is closing prices below solid technical support at $162.00. First resistance is seen at $165.00 and then at the contract high of $166.275. First support is seen at today’s low of $162.90 and then at last week’s low of $162.35.  For feeder cattle futures, the next upside price objective for the bulls is to close May futures prices above technical resistance at $215.000. The next downside price objective for the bears is to close prices below solid technical support at $205.00. First resistance is seen at today’s high of $211.20 and then at the contract high of $212.375. First support is seen at $208.525 and then at last week’s low of $208.00.

What to do: Get current with advised feed coverage. Be prepared to extend coverage on additional price pressure.

Hedgers: Carry all risk in the cash market for now.

Feed needs: You should have all soymeal needs covered in the cash market through May. You are hand-to-mouth on corn-for-feed needs.

 

 

 

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