Hogs
Price action: June lean hogs sunk $1.175 to $98.275 and closed near mid-range.
Fundamental analysis: Lean hog futures faced followthrough selling today, in a continued technical breakdown in the wake of Tuesday’s reversal lower. Weakness in pork cutout, which will likely bleed into the cash hog market, likely weighed on hog futures the past couple of days. Pork cutout did inch 23 cents higher to $96.82 at midsession today, supported by gains in ribs and bellies. Reports out of Smithfield Foods that China is no longer a viable market for U.S. pork from the processor has likely pressured hog and pork prices as of late. Company executives noted that China’s tariffs of 172% on U.S. pork has effectively priced the country out of the market. China makes up about 3% of Smithfield’s sales, though a portion of that is products U.S. consumers generally do not eat. The CME lean hog index is up another 60 cents to $88.78 as of April 28, the ninth consecutive daily gain. The preliminary calculation puts the index up another 47 cents to $89.25 tomorrow, which would put May futures about $2.50 above the index, indicating traders’ anticipation of slowing cash market gains here in the next few weeks.
Technical analysis: June lean hog futures saw persistent selling again today as bulls continue to lose control of the near-term technical advantage. Support at $97.50 limited the downside today, weakness below that mark finds little support until $95.50. Resistance comes in at the 10-day moving average at $98.95 then the psychological $100.00 mark on a bounce.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
Feed needs: You should have all corn-for-feed needs covered in the cash market through May. You also have all soymeal needs covered in the cash market through May.
Cattle
Price action: June live cattle fell $1.80 to $208.40, while August Feeders slid $1.875 to $295.025.
Fundamental analysis: Cattle futures paused after scoring a new for-the-move high in early trade. The move wasn’t entirely unexpected as nearby contracts crept into near-term overbought territory after steadily rallying $19.20 from the April 9 low. While today’s price action appears a bit daunting, the pullback could be chalked up as healthy to some traders, with supply fundamentals still ringing fully bullish, which is compounded by grilling season demand. Grocers have likely been ramping up purchases recently for Memorial Day features, though low slaughter numbers amid deeply negative packer margins may be dampening boxed supplies. Nonetheless, wholesale values remain robust, with Choice boxed beef surging $5.49 on Tuesday to $348.26. The figure surpassed the August 2021 peak to score the second highest ever behind the 2020 surge to a record $450.92. However, the noon report did show a $2.49 pullback in Choice supplies to $345.77, with Select down 67 cents to $323.15. However, if low slaughter numbers persist, it could lead to shortages among retail outlets. Daily increases in box prices demonstrate the volatility of the meat trade.
Meanwhile, feeders retreated along with fats at midweek, although the move was not all that surprising given Tuesday’s reach to contract highs.
Technical analysis: June live cattle futures retreated after scoring a fresh contract high in early trade, ending the session below support at h$209.54 and $208.88. Initial support will now serve at $208.17 and is backed by the 10-day moving average of $206.88. Meanwhile, initial resistance will now serve at today’s failed support areas, then at $210.92 and today’s new contract high of $211.00.
What to do: Get current with feed coverage. Carry all production risk in the cash market for now.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: You should have all corn-for-feed needs covered in the cash market through May. You also have all soymeal needs covered in the cash market through May.