Hogs
Price action: June lean hog futures slid 65 cents to $98.85 and closed nearer session lows.
Fundamental analysis: Lean hog futures struggled to build on recent bullish momentum today as the June contract traded within yesterday’s session. There was a substantial shift in the market mid-day that took live cattle futures to record highs before making a key reversal and closing lower on the day. That selling pressure bled over into the hog market, dragging prices lower despite resurgent strength in cash fundamentals. After falling late last week and into early this week, the CME lean hog index has reversed back higher, rising 39 cents to $90.31 as of May 12. The preliminary calculation puts the index up another 46 cents to $90.77 tomorrow, which would mark a fresh for-the-move high. The reversal in the cash index comes as tariffs on Chinese and U.S. goods have been paused between the two countries, which will hopefully drum up export demand. Pork cutout is working higher and into the upper end of the recent sideways range as well, also lending strength to the cash hog market. Cutout rose $1.12 at midsession today to $98.14, supported by strength in bellies and butts.
Technical analysis: June lean hog futures traded within Tuesday’s range today, struggling to garner much bullish momentum. Bears ultimately retain the technical edge, though their grip has weakened in recent days. Bulls held support at $98.45 today, the 10-day moving average, which will remain key support. Weakness below that mark eyes support at $97.75. Resistance stands at $99.50 then the psychological $100.00 mark on a reversal back higher. A break above $100.00 would quickly render bulls the technical advantage.
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 and soymeal needs covered in the cash market through June.
Cattle
Price action: June live cattle fell $2.375 to $213.95, while August feeders tumbled $4.025 to $301.975.
Fundamental analysis: Cattle bulls continued to show force, pushing June futures to a fresh all-time high despite persisting overbought conditions, though ended the session in a low-range close. Supply/demand fundamentals remain the chief supporting factor, allowing feedlots to hang out in the driver seat through cash negotiations as slaughter continues to trail year-ago. Wholesale values have inevitably held stable, with Choice topping $350.00 for only the second time, ultimately pushing already-negative packer margins to the lowest level in ten years, as wholesale values have been unable to keep pace with rocketing cash prices. The noon report shows Choice down 54 cents to $349.56, with Select down 24 cents at $334.23, with movement at 74 loads.
The closing of the Mexican border has exacerbated an already tight supply, with producers retaining older cows in hopes of producing another calf amid robust prices. This has reduced slaughter totals, with packers forced to pull from the fed cattle population to assemble weekly slaughter needs. However, heavier carcass weights have helped offset those declines a bit. Nonetheless, persisting snug supplies coupled with elevated grilling season and potential export demand should continue to lend strong support to cattle prices.
Technical analysis: June live cattle tested the 10-day moving average for the first time in a month, though bulls continue to fully grasp the near-term technical advantage. A new all-time high of $218.625 today, which is bulls’ next obstacle to overcome. Meanwhile, bears will look to forge a close below the 40-day moving average of $205.75, though initial support lies at $213.60 and again at the 20-day moving average of $210.24.
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 and soymeal needs covered in the cash market through June.