Livestock Analysis | April 8, 2024
Fundamental analysis: Lean hog futures saw modest profit-taking following Friday’s surge higher for most of the session, though saw buying into the close, marking a fresh contract-high close. Nearby futures saw relative strength to most-active June futures as cash fundamentals continue to show robust strength. The CME lean hog index rose 43 cents to $86.31 today (as of April 4), while the preliminary calculation puts the index up another 74 cents to $87.05 tomorrow (as of April 5). The strength seen in the last week took traders somewhat by surprise, which is clear when one looks at the April contract’s chart, which has marched higher since March 25. Strength in the index has shown little signs of slowing since moderate weakness at the end of March. Wholesale pork prices have supported cash hog prices as well, giving packers margin to pay up for hogs. Wholesale pork values shot up to the highest mark since last August, as cutout rose $3.74 to $101.49. Big gains in bellies led cutout higher at midsession, though all cuts except picnics posted gains. It is not uncommon for big midsession gains to be at least partially given up in the afternoon, though it is worth noting that the big jump in bellies eclipsed last week’s highest quote by just $2.76.
Technical analysis: June lean hog futures continue to be supported by robust strength in the cash market. Bulls retain full control of the technical advantage, scoring a fresh contract high and contract high-close today. Bulls are seeking to overcome initial resistance at $107.975, quickly backed by the psychological $108.00 mark, then $110.00. Meanwhile, selling finds support at $105.725, the psychological $105.00 mark, then the 10-day moving average at $104.60.
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.
Fundamental analysis: The live cattle futures market saw short covering today after prices dropped to a 2.5-month low last Friday. Technical selling was featured in the feeder cattle futures market.
Cattle futures traders are still nervous regarding the emerging influenza infection in cattle, which is not the same as highly pathogenic avian influenza. The American Association of Bovine Practitioners (AABP) will now refer to it as Boving Influenza A Virus (BIAV), which more accurately depicts it. Extra nervous traders mean a reluctance for speculators to play the long side of the cattle markets.
Last week’s cash cattle trading averaged $185.73, down $2.50 and the lowest price in a month. We look for cash trade this week to be near steady after today’s solid noon report that showed Choice-grade boxed beef cutout value rose a solid $4.59 to $301.76, while Select grade gained a solid $6.78 to $301.48, narrowing the Choice-Select spread to just 28 cents. The strong boxed beef gains do hint at signs of stabilization. However, the narrow Choice-Select spread at present suggests cattle weights are up amid plentiful supplies. Movement at midday was light at 44 loads.
Technical analysis: The cattle futures bears have the overall near-term technical advantage. Prices are trending down on the daily bar charts. The next upside price objective for the live cattle bulls is to close June futures above solid resistance at $177.50. The next downside technical objective for the bears is closing prices below solid technical support at $168.00. First resistance is seen at today’s high of $173.82 and then at $175.00. First support is seen at last week’s low of $171.40 and then at $170.00.
The next upside price objective for the feeder bulls is to close May futures prices above technical resistance at $246.00. The next downside price objective for the bears is to close prices below solid technical support at $230.00. First resistance is seen at today’s high of $240.00 and then at $242.00. First support is seen at $235.00 and then at $234.00.
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.
