Hogs
Price action: June lean hogs rose a nickel to $95.175, near mid-range and hit a two-week high.
Fundamental analysis: The lean hog futures market saw more tepid short covering today, but gains were limited by weakening cash hog and pork market fundamentals. Hog market bulls are hoping the grilling season that is right around the corner, along with elevated beef prices at the meat counter, will prompt some better consumer demand for pork.
The latest CME lean hog index is down another 86 cents to $86.00 as of April 11, marking the eighth straight daily decline. Wednesday cash index quote is projected down another 63 cents at $85.37. The national direct five-day rolling average cash hog price quote today is $84.28.
The noon report today showed pork cutout value dipped 16 cents to $92.62, with bellies down $6.58. Movement at midday was good at 190.99 loads.
Technical analysis: Bears have the overall near-term technical advantage. However, a price downtrend on the daily bar chart has been negated. The next upside price objective for the hog bulls is to close June prices above solid chart resistance at the March high of $99.70. The next downside price objective for the bears is closing prices below solid technical support at the April low of $88.00. First resistance is seen at today’s high of $96.20 and then at $97.50. First support is seen at this week’s low of $93.80 and then at $92.50.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
Feed needs: You have all corn-for-feed needs covered in the cash market through April. You have all soymeal needs covered in the cash market through May.
Cattle
Price action: June live cattle futures climbed 72.5 cents to $199.80 and closed near mid-range. May feeders settled $1.575 higher to $282.525, near session highs.
Fundamental analysis: Cattle futures traded firmer again today but June futures continue to encounter resistance at the psychological $200.00 mark. Volume across the curve shrunk day after day over the past week. Traders are on the sidelines waiting for things to settle down before establishing positions again in the marketplace. That claim is bolstered by open interest falling by over 80,000 contracts (around 20% of the total) across the curve over the past two weeks. Open interest has yet to rebuild as more and more traders flatten positions and take a more prudent approach to risk management. This phenomenon is not happening in live cattle futures only, but across the agricultural complex. The longer open interest stays down, the more concerning it is, but open interest falling as prices have rallied, points to the recent rally being largely due to short covering.
Cash cattle trade remains light to start the shortened week. Only 42 head of heifers have traded hands at $208.00. It is worth noting that even while heifers generally trade at a discount to steers, this week’s trade started above last week’s five-area average. Wholesale beef values have stabilized after recent weakness in the mid-$330’s for Choice. After rising Monday, Choice cutout fell 94 cents to $334.69 at midsession today. Select climbed another 22 cents to $316.07. Movement this morning totaled 93 loads, toppling yesterday’s total for the entire day.
Technical analysis: June live cattle futures rose for the third consecutive session but continue to struggle against psychological $200.00 resistance. Tentative resistance stands above that mark at $200.50 while sustained strength looks to overcome stiff resistance at $202.00. Support comes in at $199.00 then the 40-day moving average at $198.05 on a reversal lower.
May feeder cattle futures continue to be supported by discounts to the cash market and are working higher. Bears continue to hold a modest technical advantage and are looking to break prices below psychological support at $280.00 before tackling support at the 40-day moving average at $278.00. Bulls are looking to challenge resistance at $284.00 on continued strength, which stood as a firm support zone before prices broke down in early April.
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 have all corn-for-feed needs covered in the cash market through April. You have all soymeal needs covered in the cash market through May.