Livestock Analysis | April 11, 2024
Price action: Expiring April lean hog futures slipped 30 cents to $91.45 Thursday, while most-active June posted a 25-cent bounce from Wednesday’s big breakdown, closing at $105.80.
Fundamental analysis: Seasonal strength continued dominating the hog and pork complex Thursday. As expected, Tuesday’s official quote for the CME hog index climbed 90 cents to $88.78. Moreover, Wednesday’s preliminary calculation put that figure another $1.06 higher at $89.84. Indeed, while the expiring April contract [which goes off the board at noon tomorrow (4/12)], slipped from Wednesday’s close, it still projects a gain of approximately $2.00 by the time Friday’s official quote is published next Tuesday. Again, hog futures are cash-settled against the CME index at expiration.
Bulls also had to be encouraged by the latest wholesale market news. For example, despite an approximate $8.50 dive in primal pork belly values yesterday, pork cutout dipped just 46 cents to $100.25. That reflected significant across-the-board gains by the other pork cuts. Conversely, a sizeable increase in belly values this morning helped boost pork cutout to a fresh 2024 high of $101.11 at midsession today. Recent news of strong U.S. pork exports during February and today’s upward revision of the 2024 U.S. pork export forecast to $7.34 billion pounds (up 210 million from last month) reflect widespread optimism about the strength of underlying pork demand. We see little in the way of fundamental developments likely to weigh on the hog and pork complex in the short term.
Technical analysis: Bears again tested 10-day moving average support near $103.34 in June lean hog futures today, but bulls forced a rebound keeping the short-term technical advantage pointing in their favor. Support at the 10-day moving average near $105.45 is closely backed by the lows of the past two sessions, at $104.825 and $105.075. A close below the former would open the door to a test of the 20-day moving average near $103.34, then the 40-day moving average near $101.67. Today’s high marked initial resistance at $106.675, but bulls are likely targeting last Friday’s high at $108.00, then yesterday’s contract high at $109.65 and the psychological $110.00 level.
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 $173.90 and nearer the session high. May feeder cattle gained $1.625 at $238.15 and nearer the session high after hitting a three-month low early on.
Fundamental analysis: The cattle futures markets saw short covering today following recent losses. Slightly improving cash market fundamentals late this week also prompted some buying interest in the futures markets. USDA reported 1,156 head of cattle traded at $184.97 in Iowa Wednesday, which was down about $2.00 from last week’s average at $186.83. The agency also said 70 head traded at $182.00 in Kansas Wednesday. We expect similar trading in the north and south later today and tomorrow. Beef packers are attempting to manage negative margins by limiting slaughter runs. The noon report today did show some improvement as wholesale beef cutout value was up 42 cents for Choice grade, at $298.65. Select grade rose $1.11 to $297.13. Movement at midday was decent at 70 loads. The Choice-Select spread is presently at $1.52.
World Weather Inc. today said that in the Plains states “unusual heat and windy conditions Friday through Tuesday will lead to livestock stress.” A location or two may reach or get very close to 100 degrees Sunday.
USDA this morning reported U.S. beef export sales of 13,600 MT for 2024, down 27% from the previous week but up 2% from the four-week average.
Technical analysis: The live and feeder cattle futures bears have the overall near-term technical advantage. Prices are trending down on the daily bar charts. A bearish symmetrical triangle pattern has also formed on the daily bar chart for June live cattle. The next upside price objective for the 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 this week’s high of $175.55 and then at $177.00. First support is seen at today’s low of $171.925 and then at last week’s low of $171.40. The next upside price objective for the feeder bulls is to close May futures prices above technical resistance at $245.00. The next downside price objective for the bears is to close prices below solid technical support at $230.00. First resistance is seen at this week’s high of $240.20 and then at $242.00. First support is seen at today’s low of $234.675 and then at $233.00.
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.
