Livestock Analysis | April 1, 2024
Price action: Nearby April futures rose a modest 32.5 cents to $86.95, while the most active June contract surged $2.05 to $103.50, a contract high-close.
Fundamental analysis: Thursday’s Hogs & Pigs Report, which leaned bearish against expectations, seemingly had little effect on futures to begin the week as Traders extended last week’s strength to post sharp gains. Strong technical support continues to prop up hogs, with the nearby April contract notching a near one-month intraday high amid solid buying efforts. Meanwhile, futures’ premium to the cash index continues support lean hog futures, which currently hold a $2.17 premium to the CME cash index in the wake of today’s rally and a 37 cent rise in the CME lean hog index to $84.64 as of March 27. Preliminary data shows the index will rise 18 cents to $84.78. The noon report showed the pork cutout value surging $5.77 to $99.43 amid a near $32-rebound in bellies after a $10-drop on Friday.
USDA’s Hogs & Pigs Report last Thursday showed nearly all categories above the average pre-report estimates. Government estimates indicated the March 1 hog herd was up 0.6% from year-ago, with the market hog inventory 0.8% larger, while the breeding herd dropped 2.1%. The winter pig crop increased 1.9%, despite a 2.6% drop in winter farrowings, which was offset by a record (4.6%) increase in litter size to 11.53 head.
Technical analysis: June lean hogs were able to rebound to mark a fresh contract high after gapping lower at this morning’s open. Initial resistance will serve at today’s high of $104.25, then at $104.82 and $105.00. Meanwhile, initial support will serve at $102.64, then at the 20- and 10-day moving averages of $101.35 and $101.48. From there additional support serves at $100.47 and the 40-day moving average of $99.52.
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.
Price action: June live cattle futures closed $4.925 lower to $175.325, while nearby April futures dropped $4.925 to $180.075. May feeder cattle futures plunged $6.025 to $242.675.
Fundamental analysis: Cattle futures traded on both sides of unchanged before heavy selling emerged this afternoon, sending prices sharply lower into the close. Selling intensified after news of a human case of highly pathogenic avian influenza after contact with an infected dairy cow in Texas. After sharply lower cash trade to start the week, higher trade took place to close out the week. Last week’s cash average still dropped $1.33 from the prior week’s record to $188.23, though that is sharply up from the middle of the week last week. Higher cash trade apparently supported futures late last week but bulls failed to follow through today. Cash prices rallying back near record levels has further pressured packer margins, which have been sinking deeper into the red as a corresponding wholesale bounce has yet to occur. That is likely to limit cash market negotiations this week, especially as fresh contracted supplies became available to packers today. Wholesale beef prices were lower at midsession, as Choice cutout was down another $1.67 to $305.05 and Select was down $1.27 to $302.16, further narrowing the Choice/Select spread to $2.89. The continued relative strength of Select beef shows the underlying strength of beef demand, as some consumers are seeking to purchase beef, but are looking for cheaper options. That underlying fundamental support could play a key role in keeping the downside intact for cattle futures.
Feeder cattle futures showed impressive relative strength this morning until selling intensified this afternoon. The market for fats and feeders alike entered “risk-off” mode following news this afternoon. The CDC remains that the risk to humans remains low, despite the first transmission taking place.
Technical analysis: Bulls failed to maintain corrective buying efforts this morning as sellers forced a fresh for-the-move low close this afternoon. Bulls have lost the near-term technical advantage in June live cattle futures as momentum has shifted to the bears. Bulls are seeking to reclaim resistance at the 100-day moving average, currently at $176.33, then $178.48 and the psychological $180.00 mark, which is backed by the 200-day moving average at $180.68. Meanwhile, support stands at today’s low of $174.15, with firm backing from $172.00.
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: You should have all corn-for-feed and soymeal needs covered in the cash market another month through April.
