Livestock Analysis | April 2, 2024
Price action: June lean hog futures rallied 22.5 cents to $103.725, though settled well off intraday highs.
Fundamental analysis: Lean hog futures struggled to maintain early morning gains as profit-taking forced prices off intraday highs. Hefty premiums held by June futures to the lean hog index likely limited gains in lean hog futures today. The CME lean hog index continued to extend higher seasonally, as it is up another 18 cents to $84.78 today (as of March 29). The preliminary calculation puts the index up another 14 cents to $84.92 tomorrow (as of March 30), which would be the highest quote since late September of last year. April futures have continued to trade modestly above the index, as they are set to go off the board at noon on April 12. They currently hold a $1.77 premium to the index and will cash settle against the index quote for that date. Wholesale pork prices posted gains at midsession, led by strength in ribs. Cutout was up 94 cents to $97.55, which would mark a fresh for-the-move high if gains are sustained through trade this afternoon. Volatility continues to persist in individual cuts, which is fairly normal for this time of year. Movement firmed to 138.74 loads, though that was still fairly light.
Technical analysis: June lean hog futures surged to a fresh for-the-move high before profit taking curbed gains into the close. Bulls retain control of the near-term technical advantage, though the upside has largely been kept in check by uptrend line resistance, which currently stands at $103.85. Further buying targets today’s high of $104.80, then the psychological $105.00 mark. A reversal lower finds support at $103.025 then $102.00, the 10-day moving average. Further selling would encounter uptrend line support at $100.50.
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 rose $1.05 to $176.375, while nearby April futures rose $1.70 to $181.775. May feeders rallied $3.075 to $243.50.
Fundamental analysis: Nearby cattle futures recaptured a portion of Monday’s sharp losses, though buyers remained cautious as traders weigh information related to the highly pathogenic avian influenza (HPAI), which has infected several dairy herds across the country. Corrective buying efforts were limited by overhead technicals, combined with fundamental weakness from last week’s $1.33 drop in the average cash cattle price and a notable decline in wholesale beef prices on Monday. The noon report showed a further slide in wholesale values, with Choice down 51 cents to $305.23 and Select $1.77 lower to $300.02, widening the Choice/Select spread a bit to $5.21 and casting a further shadow over packer margins as cash prices have recently held steady despite recent pressure in futures. Lower cash cattle trade is largely expected this week, with negotiations likely to extend deep into the week.
Traders will continue to closely monitor HPAI cases, which have been detected in dairy herds in Texas (7), Kansas (2), Michigan (1) and New Mexico (1), with a presumptive positive test result pending for a herd in Idaho. Headlines Monday indicated a man in South Texas who worked in a dairy contracted the illness, with symptoms reportedly similar to pink eye.
Technical analysis: June live cattle spent the session trading within Monday’s lower range, with the 100-day moving average of $176.29 serving up initial resistance, while the previous session low of $174.15 is now key support. A move higher will face additional resistance at $179.58, with solid resistance serving at the 200-, 10- and 50-day moving averages of $180.67, $180.78 and $181.69. Conversely, additional support lies at $172.61 and is backed by $169.89.
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.
