Advice Alerts: Hog producers: Hedge 2Q production... Summer lean hog futures have stalled at contract highs and the upside appears to be overdone. We advise hog producers to hedge half of expected second-quarter production in the options market by purchasing $104.00 puts on the July futures contract. Our fill was $3.35. We will evaluate exiting the hedges before expiration.
Livestock producers: Extend feed coverage... We advise livestock producers to cover through March for corn needs in the cash market. Corn futures have begun showing impressive strength following the bearish Jan. 12 reports and the downward move looks to have played out. Prices are poised to break back into the sideways range that capped price action from November through December. You now have full coverage in cash through March.
Hogs
Price action: April lean hog futures lost $1.675 to $95.15, nearer the session low.
Fundamental analysis: Lean hog futures today saw profit-taking pressure after hitting a contract high on Tuesday. Follow-through selling pressure on Thursday would likely produce some technical damage.
The latest CME lean hog index is up 42 cents at $84.43. Thursday’s projected cash index price is up another 79 cents at $85.22. The national direct five-day rolling average cash hog price quote today is $60.06. The noon report today showed pork cutout value up 57 cents at $96.26, led by gains in bellies. Movement at midday was 179.94 loads.
Technical analysis: April lean hog futures bulls still have the firm overall near-term technical advantage. Prices are trending higher on the daily bar chart. However, solid losses Thursday would produce a rare and bearish broadening pattern on the daily bar chart. The next upside price objective for the hog bulls is to close April futures prices above solid chart resistance at $100.00. The next downside price objective for the bears is closing prices below solid technical support at $92.50. First resistance is seen at today’s high of $96.325 and then at the contract high of $97.55. First support is seen at today’s low of $94.775 and then at $94.00.
What to do: Get current with feed coverage.
Hedgers: You have 50% of Q2 production hedged, with all remaining risk in the cash market.
Feed needs: You should have all your soymeal needs covered through March in the cash market. You should also have corn-for-feed needs purchased through March. Be prepared to make additional purchases.
Cattle
Price action: April live cattle rose $1.325 to $238.725, near the session high. March feeder cattle gained $3.85 to $365.85, near the session high and hit a three-month high.
Fundamental analysis: The live and feeder cattle futures markets saw renewed chart-based buying from the speculators today, and amid supply and demand fundamentals that remain solid.
USDA today reported very light cash cattle trading activity so far this week, averaging $234.00. USDA Monday reported average cash cattle trading last week at $234.70, up $2.20 from the week prior. The noon report today showed wholesale boxed beef cutout values mixed. Choice-grade was up $1.14 at $369.25, while Select-grade lost $1.46 to $363.73. Movement at midday was light at 50 loads. The Choice-Select spread at midday today was plus $5.52.
Traders are awaiting Friday afternoon’s semi-annual USDA cattle inventory report.
Technical analysis: The live and feeder cattle futures bulls have the overall near-term technical advantage but price uptrends have at least temporarily stalled out. The next upside price objective for the live cattle bulls is to close April futures above resistance at $240.00. The next downside technical objective for the bears is closing prices below solid technical support at the January low of $231.275. First resistance is seen at the January high of $239.05 and then at $240.00. First support is seen at today’s low of $235.60 and then at last week’s low of $232.65.
The next upside price objective for the feeder bulls is to close March futures prices above technical resistance at $370.00. The next downside price objective for the bears is to close prices below solid technical support at $350.00. First resistance is seen at today’s high of $366.20 and then at $368.00. First support is seen at today’s low of $359.30 and then at $357.50.
What to do: Cover corn-for-feed needs through March in the cash market. Be prepared to make additional purchases.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: For soymeal, you have full coverage in cash through March. You have corn-for-feed needs covered through March as well. Be prepared to make additional purchases if value prices continue.