Livestock Analysis | March 13, 2024

Livestock Analysis
Livestock Analysis
(Pro Farmer)

Hogs

Advice: We advise livestock producers to extend cash corn-for-feed and soymeal coverage another month through April. 

Price action: April lean hog futures dropped 47.5 cents to $84.875, though it settled nearer session highs.

Fundamental analysis: Lean hog futures failed to build on Tuesday’s strength, though they closed well off session lows as futures are hyper focused on price action in cash fundamentals. The cash market saw little guidance as light volume in the negotiated market barred much of yesterday’s data from view and packer submission problems delayed today’s data. Still, data released late in the session points to further strength in the CME lean hog index. Today’s quote from the index is up 20 cents to $81.61 (as of Mar. 11), while the preliminary calculation puts the index up another 41 cents tomorrow to $82.02. That would mark a fresh for-the-move high, the highest quote for the index since Oct. 12 of last year. The resurgent strength in the index following weakness late last week is likely to instill confidence in traders that seasonal strength is likely to persist.

Wholesale pork prices continue to struggle maintaining midsession gains into the mid-$90’s, as cutout actually fell from yesterday’s midsession quote of $94.57 to $92.47 following afternoon trade. The midsession quote today fell another 2 cents to $92.45, with weakness in loins and butts largely offset by gains in all other cuts. Movement surged to 190.2 loads at midsession, which makes relatively flat wholesale prices even more impressive. Retailer demand for pork has proved robust and is likely to continue to support cash fundamentals in the near term.

Technical analysis: April lean hog futures gapped lower on this morning’s open and saw sustained selling pressure through much of this morning before rebounding and closing nearer session highs. A two-month-old uptrend on the daily bar chart has stalled out, though Tuesday’s strength paired with today’s late-session firmness indicates bulls still have some fight left in them. Bulls are seeking to overcome resistance at the $85.00 mark, which coincides with the 10-day moving average. Further resistance stands at Tuesday’s high of $85.575, $85.90, then $87.20. Meanwhile, further selling encounters support at $83.925, today’s low, then the 40-day moving average at $83.495, which capped the downside on the recent pullback.

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 corn-for-feed and soymeal coverage in the cash market another month through April.

 

 

Cattle

Advice: We advise livestock producers to extend cash corn-for-feed and soymeal coverage another month through April. 

Price action: Cash strength continues supporting the cattle complex. Nearby April live cattle rose $1.675 to $189.925, while the June contract surged $2.10 to $186.05. Expiring March feeder futures advanced $1.30 to $250.275, while April feeders climbed $1.725 to $255.85.

Fundamental analysis: Few factors seem to be working against cattle market bulls at this juncture. Choice cutout did slip 85 cents to $309.74 at noon today, but that only came after making a fresh first-quarter high at $310.59 at Tuesday’s close. Even more impressive was the fresh 52-cent rise in select-grade cutout to $300.12. This marks just the fifth time (following the 2020 covid-driven spike, twin 2021 peaks and last year’s high) select cutout has topped $300.00. In addition, with calf-fed animals (placed last fall) coming to market in increasing numbers, such select-grade strength indicates underlying demand is quite robust.

When that demand strength is combined with fed cattle marketings remaining reasonably current, we see little reason to think the usual seasonal advance in fed cattle values will end in the near future. Indeed, it looks as if cash trading may have accelerated today after light trade in TX-OK, Kansas and IA-S. Minn. took place yesterday. We would particularly note that the exchange of a lot of 35%-65% steers for $183.00 in TX-OK dragged the five-area average down to $184.79. We expect this week’s cash trade to rise again. Indeed, an early start to this week’s cash trading would suggest a relatively large price rise.

Feeder futures benefitted from the fed cattle gains, although a divergence between rising corn prices and a drop in soymeal quotes probably exerted offsetting influences over feeders. Futures gains may also have been limited by the premiums carried above the feeder index, especially those in the deferred contracts. That is, the feeder index slipped two cents to $248.26 when published Tuesday afternoon, which left nearby March about $2.00 premium at today’s close.

Technical analysis: Bulls clearly own the short-term technical advantage in April live cattle futures, especially after the contract posted a fresh high close for 2024 today. Bears are likely hoping the psychological $190.00 level, as well as the top side of the October 23 chart gap, at $190.275, will halt the ongoing advance. If they prove unable to do so, that would open the door to a test of the October 2023 high at $195.275, with a follow-through advance then targeting the hugely important $200.00 level. Strong support is provided by the contract’s 10- and 20-day moving averages near $187.78 and $187.32, respectively. Expect added support from the psychological $185.00 level to the 40-day moving average near $184.52,

Bulls still hold the short-term technical advantage in April feeder futures as well, but the case is not especially clear-cut. The close slightly above the 10- and 20-day moving averages, both near $255.40, seemingly added to the bullish advantage, although the short-term downtrend line marks initial resistance near $256.68. That’s backed by last Friday’s high at $258.325, and the Feb. 26 high of $260.80. Psychological resistance stands at $260.00. Look for support at Monday’s low of $252.65, with a drop below that point likely having bears targeting the 40-day moving average near $250.57, then the psychological $250.00 level.

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 corn-for-feed and soymeal coverage in the cash market another month through April. 

 

 

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