Livestock Analysis | April 18, 2024
Price action: Hog futures proved generally weak Thursday, with most-active June futures slipping 2.5 cents to $102.70.
Fundamental analysis: Seasonal strength showed up in the hog and pork complex again Thursday. As expected, the CME hog index for Tuesday rose another 38 cents to $91.36 when officially quoted this morning, while today’s USDA report implied it will gain 10 more cents to $91.46 when Wednesday’s official figure is posted tomorrow. Still, the slow rate of gain seen lately has likely encouraged selling, since the modest advances seem to diminish the cash market’s potential upside this summer. Having slaughter average 2.2% over year-ago levels during the first two weeks of April may also have bears thinking the market’s upside potential is limited, especially after three weeks of annualized reductions in March suggested spring supplies might prove surprisingly small.
Mid-week wholesale losses likely encouraged futures selling as well. However, after having dived Tuesday and remaining weak yesterday, pork belly values leapt almost $20.00 at midsession today. When combined with mixed quotes for the other cuts, those boosted pork cutout $2.44 to $101.99. We remain guardedly optimistic about the hog market’s upside potential this spring and summer since slaughter rates will almost surely continue declining on a seasonal basis into early July. Conversely, grilling season demand and bacon demand for BLT season are just getting started. Grocer buying from mid-May through late June for the Memorial Day through Independence Day period should be much stronger. We think there’s a good chance peak cash prices will surpass the levels projected by spring and summer futures.
Technical analysis: Bears looked set to take control of the technical situation in June hog futures this morning, especially after the contract price fell well below its 40-day moving average. But the belated comeback, likely tied to wholesale strength, kept the balance tipped toward bulls. Stout support persists at the 40-day moving average near $102.27, with secondary support likely at today’s low of $101.175. Expect psychological support at $100.00. Today’s late high at $102.825 marked initial resistance, with backing from the contract’s 20- and 10-day moving averages near $103.53 and $104.86, respectively. A close above the latter level would have bulls again targeting the contract high at $109.65.
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 5 cents to $175.375 and near mid-range. Prices hit a two-week high early on. May feeder cattle gained $2.275 at $242.55, nearer the session high and hit a two-week high.
Fundamental analysis: The live cattle futures bulls late this week continue to work on stabilizing prices after the recent steep sell-off. The gains in feeder cattle futures this week begin to suggest that market has put in a near-term bottom.
Cash cattle trade has been very quiet so far this week. Packers are slow to establish bids and feedlots are asking for higher prices. There were just 115 steers that changed hands at $183.00 on Wednesday, likely in Iowa, according to USDA. Given the slow start to cash negotiations and Friday afternoon’s USDA cattle-on-feed report, active cash cattle trade could remain very light until after the report. The cattle-on-feed report is expected by the trade to show on-feed inventories up around 2% from last year at this time. Placements are expected to be down around 8% and marketings down around 12% from last year, according to a Dow Jones Newswires report.
The noon report today showed wholesale beef cutout value fell again, with Choice down 71 cents at $296.10, while Select dropped $1.50 to $289.38. Movement at midday was decent at 70 loads. The Choice-Select spread is presently at $6.72.
USDA this morning reported U.S. beef sales of 17,700 MT for 2024, up 30% from the previous week and 27% from the four-week average. Exports of 16,700 MT were a marketing-year high.
Technical analysis: The live cattle futures bears have the slight overall near-term technical advantage but the bulls have had a good week so far. The next upside price objective for the bulls is to close June futures above solid resistance at $178.00. The next downside technical objective for the bears is closing prices below solid technical support at the April low of $170.25. First resistance is seen at today’s high of $176.275 and then at $177.00. First support is seen at $174.00 and then at this week’s low of $172.325.
The feeder cattle futures bulls and bears are back on a level overall near-term technical playing field. The next upside price objective for the feeder bulls is to close May futures prices above technical resistance at $250.00. The next downside price objective for the bears is to close prices below solid technical support at the April low of $232.625. First resistance is seen at $243.00 and then at $244.00. First support is seen at today’s low of $239.475 and then at Tuesday’s low of $236.875.
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.
