Livestock Analysis | April 22, 2024
Price action: June lean hog futures surged 67.5 cents to $105.50, while nearby May futures climbed 47.5 cents to $96.70.
Fundamental analysis: Lean hog futures shook off weakness in the lean hog index, continuing last week’s push higher. The CME lean hog index is down 11 cents to $91.35 as of April 18 and the preliminary calculation puts the index down another 4 cents to $91.31 tomorrow. The apparent lack of downside followthrough seemed to encourage traders that the recent cash market weakness will prove to be brief, as traders actively bought futures, further widening the spread between futures and cash. Much of that premium is still justified as robust consumer demand has continued to lift wholesale pork prices, which have been supported by the early start to the grilling season this year. Wednesday’s USDA Cold Storage Report will give an inside look into just how well the start to the grilling season has been, but the last few months have shown pork stocks below the five-year average. Wholesale pork prices pushed higher at midsession, driven by gains in all cuts except loins and butts. Whole cutout rose $1.56 to $101.65 while movement totaled 145.32 loads, impressive for a Monday morning.
Technical analysis: June lean hog futures continue to show impressive strength, resuming the uptrend from the January lows. Bulls continue to hold the near-term technical advantage. Initial resistance stands at $105.80 with backing from $106.675 then $107.90. Bulls are seeking to hold initial support at $104.15 on a reversal lower, with additional support at $103.70 then the 40-day moving average at $102.25, which capped most of the downside the last couple of weeks.
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 $2.375 to $178.05, nearer the session high. May feeder cattle gained $3.175 at $245.175 and nearer the session high. Both markets hit three-week highs today.
Fundamental analysis: The cattle futures bulls are out of the gates strong early this week, following last week’s solid performances. Perceived less risk aversion in the general marketplace today favored the speculative cattle market bulls. Last Friday afternoon’s USDA Cattle-on-Feed Report was deemed mostly neutral, after a couple of bearish monthly reports in a row, and saw the agency estimate 11.821 million head of cattle in large feedlots (1,000-plus head) as of April 1. That’s up 174,000 head (1.5%) from year-ago but 35,000 head less than the average trade estimate. This was seventh straight month with a year-over-year increase in feedlot inventories. March placements fell 12.3%, while marketings dropped 13.7%.
Last week’s average cash cattle trading price was down $1.17 at $182.67—the lowest average cash price since mid-February. We expect cash trading later this week to be around steady, especially if futures markets continue to perform well this week. However, until packers can strengthen wholesale prices, their interest in actively bidding for cash cattle will remain limited.
The noon report today showed Choice-grade boxed beef cutout value up 24 cents to $295.91, while Select grade rose 60 cents to $291.43, taking the Choice/Select spread to $4.48. Movement at midday was 51 loads.
Technical analysis: The live cattle futures bulls have gained the slight overall near-term technical advantage. The next upside price objective for the bulls is to close June futures above solid resistance at $182.00. The next downside technical objective for the bears is closing prices below solid technical support at $173.00. First resistance is seen at today’s high of $178.80 and then at $180.00. First support is seen at $175.875.
The feeder cattle futures bulls have also gained the slight overall near-term technical advantage. 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 $237.50. First resistance is seen at today’s high of $246.35 and then at $248.00. First support is seen at today’s low of $243.50 and then at $242.00.
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.
