Livestock Analysis | April 4, 2024
Price action: Continued cash and wholesale strength supported hog futures again Thursday, with the expiring April contract rising 37.5 cents to $88.35 and most-active June gaining 25 cents to $105.00.
Fundamental analysis: The CME confirmed the preliminary figure for Tuesday’s hog index quote at $85.15, up 23 cents from Monday. Wednesday’s official quote looks set to jump approximately 73 cents to $85.88. That would represent the highest cash market reading since late last September. Moreover, today’s midsession quote for pork cutout leapt $3.00 to $97.91, which also marked its highest quote since last September. These conditions likely reflect seasonally improving consumer demand for pork, as well as comparatively tight supplies of market-hogs. The latter point is emphasized by last week’s hog slaughter falling below year-ago levels for the third time in the past four weeks. Pig weights are also quite close to the year-ago and five-year average levels. Expect much more of the same as hog supplies contract seasonally into early summer. We also believe robust consumer demand will amplify the usual spring surge in hog prices, suspecting the combination of tight supplies and strong usage will justify the premiums built into summer futures.
Technical analysis: Bulls still own the short-term technical advantage in June lean hog futures. Today’s close represented a fresh peak for the contract, with the daily high of $105.40 marking initial resistance. Yesterday’s contract high puts additional resistance at $105.725. A breakout above the latter point would likely have bulls targeting late-June 2022 lows around $108.50 on the long-term continuation chart. Look for a zone of initial support extending from Tuesday’s high at $104.25 to today’s low at $103.95. A decisive drop below that point would have bears targeting support at the March high around $103.50, then the contract’s 10- and 20-day moving averages near $102.21 and $101.94, respectively.
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 closed up 25 cents at $175.85 and nearer the session high. The expiring April contract gained 55 cents to $181.475. May feeder cattle gained $1.30 to $243.875 and nearer the daily high.
Fundamental analysis: The cattle futures markets today saw modest short covering following this week’s strong selling pressure that pushed prices to 2.5-month lows. Traders continue to wait for more active cash cattle trade to develop this week. The cash news so far this week appears supportive. There were 5,335 head of high-percentage (80% choice) steers traded at $187.21 on Wednesday--1,729 head in Nebraska at $187.40 and 3,606 head at $187.12 in Iowa-southern Minnesota. The three-day average for the five-direct market area was $186.99.
The noon report today showed wholesale beef cutout value lower again, with Choice dropping $1.89 to $299.41, while Select dipped 36 cents to $296.56. Movement at midday was solid at 101 loads. The Choice-Select spread is currently at $2.85, suggesting packer cutbacks that caused steer weights to rise during late winter are also creating an excessive amount of Choice-grade product, weighing on prices.
USDA reported U.S. beef export sales of 18,700 MT for 2024, up 48% from the previous week and up 53% from the four-week average.
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 this week’s high of $181.125. The next downside technical objective for the bears is closing prices below solid technical support at $170.00. First resistance is seen at Tuesday’s high of $177.50 and then at $179.00. First support is seen at this week’s low of $173.75 and then at $172.50.
The next upside price objective for the feeder bulls is to close May futures prices above technical resistance at this week’s high of $251.30. The next downside price objective for the bears is to close prices below solid technical support at $235.00. First resistance is seen at Tuesday’s high of $246.20 and then at $248.00. First support is seen at this week’s low of $240.85 and then at $240.00.
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.
